Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

On March 5, 2010, the Health Resources and Services Administration (HRSA) published a final notice on 340B drug pricing program contract pharmacy services. The notice announces the availability of final guidelines regarding the utilization of multiple contract pharmacies and suggested contract pharmacy provisions, which previously had been limited to the “Alternative Methods Demonstration Project” program. These final guidelines, which are effective April 5, 2010, replace all previous 340B program guidance documents addressing non-network contract pharmacy services.  Additional analysis is available on our Life Sciences Legal Update blog.  

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CMS has announced the dates for the 2010 Healthcare Common Procedure Coding System (HCPCS) public meetings, at which the agency will discuss its preliminary coding and payment determinations for all new public requests for revisions to the HCPCS. On May 4-5, CMS will review applications for codes for Drugs/Biologicals/Radiopharmaceuticals/Radiologic Imaging Agents; the May 25-26 sessions will review applications for Supplies; on May 27 CMS will focus on Orthotics and Prosthetics codes; and the June 8 session will review Durable Medical Equipment and Accessories coding applications. Draft agendas, including CMS' preliminary decision, will be posted on the HCPCS website at least 4 weeks before each meeting. 

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HHS published a notice February 2, 2010 announcing the adjusted Federal Medical Assistance Percentage (FMAP) rates, as provided under the ARRA, for the first quarter of FY 2010 (which began October 1, 2009).

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On February 2, 2010, the Departments of Health and Human Services (HHS), Labor, and the Treasury published a joint interim final rule with comment period implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008. The statute requires group health insurance plans to provide parity between mental health or substance use disorder benefits and medical/surgical benefits with respect to financial requirements and treatment limitations. The rule is effective April 5, 2010, and applies to group health plans and group health insurance issuers for plan years beginning on or after July 1, 2010.  CMS will accept comments on the rule until May 3, 2010.   A Reed Smith Alert on the new rules is available here.  

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On January 28, 2010, the Health Resources and Services Administration (HRSA) published a final rule updating the regulations governing the National Practitioner Data Bank for Adverse Information on Physicians and Other Health Care Practitioners. The rule implements statutory provisions requiring each state to have in effect a system of reporting disciplinary licensure actions taken against all licensed health care practitioners and entities. It also requires states to report any negative action or finding that a peer review organization, private accreditation entity, or a state has concluded against a health care practitioner or entity. The rule is effective March 1, 2010.

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On January 26, 2010, CMS published a notice announcing its approval of the following three national accreditation organizations to accredit suppliers seeking to furnish the technical component of advanced diagnostic imaging services under Medicare:   the American College of Radiology, the Intersocietal Accreditation Commission, and The Joint Commission.

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This post was written by Jacqueline B. Penrod.

On January 13, 2010, the Office of the National Coordinator for Health Information Technology (ONC) published an interim final rule (the “Standards Rule”) to adopt an initial set of standards, implementation specifications, and certification criteria for health information technology. Designed to be “the first step in an incremental approach . . . to enhance the interoperability, functionality, utility and security of health information technology and to support its meaningful use,” the Standards Rule outlines capability requirements for electronic health records (EHR) systems and establishes standards for the exchange of information between systems. It also provides guidance with respect to maintaining the privacy and security of patient data and adherence to the requirements of the HIPAA Privacy Rule.   The rule is effective February 12, 2010, although comments will be accepted until March 15, 2010. Also on January 13, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule (the “Incentive Rule”) implementing the EHR incentive payments provided for in the American Recovery and Reinvestment Act of 2009 (ARRA). Under the ARRA, hospitals and eligible professionals (EP) may qualify to receive incentive payments under the Medicare fee-for-service, Medicare Advantage, and Medicaid programs if they adopt and meaningfully use certified electronic health technology. Beginning in 2015, hospitals and EPs that do not adopt and meaningfully use such technology will have downward payment adjustments. The Incentive Rule sets forth a broad outline of the manner in which providers will be eligible for EHR incentive payments. It includes the long-awaited initial criteria to determine whether a hospital or EP is a “meaningful user” of certified EHR technology, as well as the methods which will be used to calculate the payments and adjustments. Functionality and clinical quality measures for each type of provider are proposed for each program. The Incentive Rule proposes a three-stage approach to assessing meaningful use of EHR technology, with progressive reliance on and use of electronic medical records. While the criteria for Stage 1 are set forth in detail, the criteria for the remaining two stages are expected to be developed later, taking into account progress in technology and within the health industry. The meaningful use criteria will be updated on a biennial basis; proposed criteria for Stages 2 and 3 are anticipated to be released in 2011 and 2013, respectively. The significant impact that the meaningful use criteria may have on reimbursement for providers warrants close scrutiny. The proposed rule is posted here. CMS will accept comments on the proposed rule until March 15, 2010. Reed Smith is preparing a client bulletin summarizing the Incentive Rule.

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CMS has published a notice correcting errors that appeared in the final CY 2010 rule updating the Medicare hospital outpatient prospective payment system (HOPPS) and the ambulatory surgical center (ASC) payment system.  Among other technical changes, the rule corrects Medicare ambulatory surgical center (ASC) payment rates that had been based on incorrect Medicare physician fee schedule payment amounts. The December 31, 2009 correction notice includes an updated ASC fee schedule.

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CMS has published a notice soliciting comments on an initial set of children's health care quality measures for voluntary use by state Medicaid and Children’s Health Insurance Program (CHIP) and health insurance issuers and managed care entities that contract with these programs, and providers of Medicaid and CHIP services. The notice also seeks input on how to facilitate the voluntary use of the children's health care quality measures. The comment deadline is March 1, 2010.

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The HHS Office of Inspector General (OIG) has published its annual solicitation of recommendations for developing new and modifying existing safe harbor provisions under the federal anti-kickback statute, as well as developing new OIG special fraud alerts. The comment deadline is March 1, 2010.  A status report on the comments received in response to last year's solicitation is set forth in Appendix D to the OIG’s latest semiannual report. 

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On December 9, HHS published a final rule that will implement the procedures that HHS will follow at the Administrative Law Judge and Medicare Appeals Council levels in deciding appeals brought by individuals who have enrolled in the Medicare prescription drug benefit program. In addition, the regulation will implement the reopening procedures that will be followed at all levels of appeal. HHS also published a separate final rule regarding changes to the Medicare claims appeal procedures. The rule allows Medicare beneficiaries and, under certain circumstances, providers and suppliers of health care services, to appeal certain adverse determinations regarding Medicare Part A and Part B claims. Both rules are effective January 8, 2010.

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HHS has published a notice finalizing the methodology for calculating the higher FMAP amounts available to states under the ARRA. The adjusted FMAPs are applicable to the third and fourth quarters of FY 2009.

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On December 16, 2009, the House of Representatives approved a short-term delay in looming - and very large - Medicare physician fee schedule payment reductions caused by the application of the controversial sustainable growth rate (SGR) formula to the annual fee update.  Specifically, the House version of H.R. 3326, the Department of Defense Appropriations Act for 2010, includes a provision that freezes Medicare rates at currents levels for January and February 2010, in lieu of the 21.2 percent cut scheduled to go into effect January 1, 2010.  The legislation is expected to be considered by the Senate before the end of the year.  Lawmakers also are working on longer-range solutions to the Medicare physician fee schedule's SGR formula, but as the health reform debate drags out it is seen as increasingly unlikely that a more permanent fix can be adopted before the start of the new year.

 

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On December 10, 2009, CMS published a notice correcting technical and typographical errors in the Medicare CY 2010 physician fee schedule final rule with comment period, published November 25, 2009.  Among other things, CMS is correcting the CY 2010 conversion factor because of a technical error in adjusting relative value units to reflect the agency’s policy related to the consultation codes.  The change results in the conversion factor being reduced from $28.4061 to $28.3895 (although as reported in a separate posting, legislation is awaiting the President's signature that would freeze the conversion factor at 2009 levels for January and February 2010).

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On December 7, 2009, HHS published its semiannual regulatory agenda outlining the Obama Administration's planned regulatory initiatives in a number of health policy areas.  Note that discussions of certain major regulatory initiatives (health information technology, drug and device reporting requirements, and Medicare physician, inpatient hospital, and outpatient hospital rules, among others) are highlighted in an introduction to the regulatory plan. 
 

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The Centers for Medicare & Medicaid Services (CMS) has released its final rule updating the Medicare physician fee schedule (MPFS) for calendar year (CY) 2010. Most notably, the final rule calls for a 21.2% across-the-board cut in MPFS paymentsfor 2010 due to the statutory sustainable growth rate (SGR) formula (CMS had forecast a 21.5% cut in the proposed rule). For 2010, the SGR formula results in a conversion factor of $28.4061, compared to the 2009 conversion factor of $36.0666. [NOTE:  CMS subsequently published a notice correcting the conversion factor; the new conversion factor is $28.3895].   As noted above, Congressional leaders are seeking a legislative solution to block the pending cut, but the outcome of these reform efforts are not certain at this time. CMS did exercise its administrative authority to remove drugs from the definition of “physicians’ services” for purposes of the SGR formula, which CMS expects will reduce the number of future years in which physicians are projected to experience a negative update under the SGR formula, but which does not impact 2010 rates. The sweeping rule affects a wide range of other Medicare policies, as discussed after the jump.

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CMS has issued its final rule updating the Medicare hospital outpatient prospective payment system (HOPPS) and ambulatory surgical center (ASC) payment system for 2010.  The official version of the rule is scheduled to be published in the Federal Register on November 20, 2009. With regard to the HOPPS update, CMS estimates that the rule will increase HOPPS rates by 1.9% compared to total spending in CY 2009.  This reflects a 2.1% market basket increase (reduced by 2.0 percentage points for hospitals that do not report quality data), adjusted for changes in the pass-through estimate, outlier payments, and wage index payments. Other major HOPPS and ASC provisions are outlined after the jump.

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Under CMS’s CY 2010 Medicare home health PPS (HH PPS) final rule, published November 10, 2009, Medicare home health spending is expected to be reduced by $140 million (1.03%) in 2010 compared to 2009 levels. The reimbursement reduction reflects a 2.0% home health MBI increase ($350 million), offset by the effects of an updated wage index (-$10 million), and a 2.75% decrease resulting from the third year of a 4-year phase-in of adjustments to rates to account for case-mix changes (-$480 million). Note that the home health MBI update is reduced by 2 percentage points (to 0.0%) for CY 2010 for those HHAs that do not submit required quality data. CMS also has adopted provisions designed to “mitigate possible billing vulnerabilities associated with excessive outlier payments.” Specifically, for 2010 CMS will cap per-agency outlier payments at 10%, and reduce the target for total aggregate outlier payments to 2.5% of total HH PPS payments (compared to the current 5% target), with a corresponding 2.5% increase in HH PPS rates. The rule also, among other things: requires the submission of Outcome and Assessment Information Set (OASIS) data as a condition for payment under the HH PPS; clarifies coverage of skilled services and routine medical supplies; updates conditions of participation; implements use of OASIS Version C beginning January 1, 2010; updates quality reporting measures; and implements a Consumer Assessment of Healthcare Providers and Systems (CAHPS) Home Health Care Survey beginning in 2012. The final rule also includes various payment safeguards for HHAs, but with a number of modifications from the proposed rule. Notably, CMS did not adopt a provision in its proposed rule that would have prohibited an HHA from sharing its practice location or base of operations with another Medicare-enrolled HHA or supplier, citing its determination that a broad-based prohibition on co-location policy could “negativity impact the health care delivery for some services.” CMS expressed its continuing concerns about these arrangements, however, particularly when an HHA that maintains a practice location in one state and furnishes services to beneficiaries in another state, or when HHAs have merged or consolidated operations into a single practice location, but continue to operate as distinct entities. CMS will consider its administrative remedies to address its concerns in this area.

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The Department of Health and Human Services (HHS) has published an interim final rule with comment period strengthening Health Insurance Portability and Accountability Act (HIPAA) enforcement provisions, as mandated by the Health Information Technology for Economic and Clinical Health (HITECH) Act. Specifically, the rule establishes a tiered penalty framework for HIPAA's Administrative Simplification Rules (i.e., Privacy Rule, Security Rule, Transactions and Code Sets Rules, Standard Unique Identifier for Employers, and Standard Unique Identifier for Health Care Providers). Under the HITECH Act, these provisions went into effect February 18, 2009. HHS will accept comments on the interim final rule until December 29, 2009, and the effective date of the rulemaking is November 30, 2009. A Reed Smith summary of the rule is available here. 

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November 6, 2009, the Office for Human Research Protections (OHRP), Office of Public Health and Science published two notices announcing the availability of draft guidance on institutional review board (IRB) review of research. First, OHRP published a notice seeking comments on a draft policy entitled "Guidance on IRB Approval of Research with Conditions,” which would provide OHRP's first formal guidance on this issue. In particular, the document addresses such issues as: the circumstances that permit the IRB to approve research with conditions; how the IRB should handle changes to research that are proposed after initial IRB approval; how conditions on IRB approval affect ongoing research; and documentation of conditions of IRB approval of research. Comments will be accepted until January 5, 2010. The second draft document, "Guidance on IRB Continuing Review of Research," will supersede OHRP's January 15, 2007 document entitled "Guidance on Continuing Review." Among other things, the new draft guidance has been expanded to include a section on key IRB considerations when evaluating research undergoing continuing review and to provide more details regarding regulatory requirements and recommendations for the process for conducting continuing review. OHRP is accepting comments on the revisions until January 5, 2010.

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CMS has announced that it is extending for 30 days the comment period regarding its September 20, 2009 proposed rule that would establish a Medicare end stage renal disease (ESRD) prospective payment system.  Specifically, citing the "complexity and scope" of the proposed rule, CMS is extending the comment deadline from November 16 until December 16, 2009.  

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On October 23, 2009, CMS published a notice rescinding a 1985 policy on "Medicare Criteria for Coverage of Inpatient Hospital Rehabilitation Services." This policy, HCFA Ruling 85-2, established the criteria for Medicare coverage of inpatient hospital rehabilitation services. CMS notes that its August 7, 2009 final rule implementing the inpatient rehabilitation facility (IRF) prospective payment system (PPS) adopted IRF coverage requirements and technical revisions to certain other IRF requirements to reflect the changes that have occurred in medical practice during the past 25 years. As a result, CMS is rescinding its 1985 policy, effective January 1, 2010.   In a related development, CMS has updated its Medicare Benefit Policy Manual to reflect the new IRF coverage conditions adopted in the FY 2010 IRF final rule, applicable to IRF discharges occurring on or after January 1, 2010. CMS also has posted a “follow-up information sheet” to assist providers in structuring their processes to satisfy the new requirements. Finally, on November 12, 2009, CMS is hosting a conference call to train IRF providers on the new policy; the registration deadline is 2:00 p.m. ET on November 11 or when available space has been filled. 

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CMS published a proposed rule on October 30, 2009 that would further delay two rules regarding Medicaid benefit packages and beneficiary cost-sharing. Specifically, the rule would again delay the effective date of CMS’s December 3, 2008 final rule that provides states with increased flexibility to define the scope of covered Medicaid services, along with a November 25, 2008 final rule designed to enhance state flexibility to impose premium and cost sharing requirements on certain Medicaid recipients. Upon review of legislation enacted this year and public comments received on previous notices delaying enforcement of the regulations, CMS believes "it is necessary to revise a substantial portion" of these rules. Because it may take several months, CMS is soliciting comments on delaying the effective date of the final rules from December 31, 2009 until July 1, 2010. Comments on the proposal will be accepted until November 19, 2009.

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On October 9, 2009, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that would make numerous changes to the requirements for sponsors of Medicare Advantage (MA) and Medicare Part D drug plans intended to strengthen beneficiary protections, improve plan payment rules, and clarify various program participation requirements. Among many other things, the rule would: enhance CMS’s ability to identify and approve qualified drug and health plans and remove consistently-poor performers; clarify plan requirements relating to beneficiary cost-sharing; eliminate duplication in drug and health plan bids submitted by the same organization by requiring a meaningful difference between an organization’s product offerings; expand the collection of prescription drug event data elements; clarify Part D protected drug categories and classes; and make other refinements and technical changes to the Part C and Part D regulations. CMS will accept comments on the proposed rule until December 8, 2009. The official version of the rule is scheduled to be published in the Federal Register on October 22, 2009. CMS also has released information on 2010 Medicare Part D and MA plan options and premium and copayment amounts.

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On October 7, 2009, CMS published an interim final rule with comment period implementing sections certain provisions of the Genetic Information Nondiscrimination Act of 2008 (GINA) that prohibit discrimination based on genetic information in health insurance coverage and group health plans.  These interim final regulations are effective on December 7, 2009; comments will be accepted until January 5, 2010. In a related development, the Department of Health and Human Services (HHS), Office for Civil Rights, also published a proposed rule on October 7 that would modify the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy standards to implement GINA provisions addressing the privacy and confidentiality of genetic information and make certain other changes to the HIPAA privacy rule. Comments will be accepted until December 7, 2009.

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On October 15, 2009, the OIG published a notice that seeks information from organizations that believe they have the capability to be monitors of health care entities under quality-of-care CIA with OIG.  Such monitors typically are responsible for assessing the effectiveness, reliability, and thoroughness of the health care entity's: (1) internal quality control systems; (2) response to quality-of-care issues; (3) development and implementation of corrective action plans and the timeliness of such actions; (4) proactive steps to ensure that each patient receives care in accordance with basic care, treatment, and protection-from-harm standards; the governing regulations; and the policies and procedures required to be adopted under the CIA; and (5) in residential settings, compliance with staffing requirements. In making these assessments, the monitor conducts site visits, analyzes available data, observes facility and corporate-level committee meetings, and reviews relevant documents, and the monitor submits regular written reports to the provider and OIG. The OIG notes that in order to select an appropriate monitor for any individual quality-of-care CIA, the OIG consider, but is not limited to, selecting an organization that responds to this notice. Responses may be submitted to the OIG on an ongoing basis.

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On October 7, 2009, CMS published a notice correcting typographical and technical errors in its August 27, 2009 final rule updating 2010 Medicare payment rates and policies for the acute hospital inpatient prospective payment system (IPPS) and the long-term care hospital (LTCH) PPS. CMS published a separate document on October 1, 2009 correcting technical errors in its August 7, 2009 final rule updating Medicare inpatient rehabilitation facility (IRF) PPS payments for FY 2010.

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On September 29, 2009, CMS is publishing its proposed rule to implement a prospective payment system (PPS) for Medicare end-stage renal disease (ESRD) services, as mandated by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). The proposed ESRD PPS would provide a single bundled payment to dialysis facilities covering services now included in the ESRD composite rate in addition to items and services that are now separately billable, including training and home dialysis costs, laboratory services and all ESRD-related Part B and former Part D drugs. The rule would establish a per-treatment base rate of $198.64 for all of the services related to a dialysis session, which would be subject to patient-specific and facility-specific adjustments, including adjustments for case mix and comorbidities, geographic cost differences, low-volume facilities, and certain outlier cases. As required by MIPPA, the rate is estimated to result in payments that equal 98% of the estimated payments that would have been made absent the statutory changes. The new payment system would apply to dialysis services furnished to Medicare beneficiaries on or after January 1, 2011, although the rule establishes a four-year phase in-period (note that facilities may elect to be paid entirely under the new system beginning January 1, 2011). CMS also is proposing to apply a “transition budget neutrality adjustment factor” of -3.0% to all payments during the phase-in, plus a $14 per treatment adjustment to the composite rate portion of the blended payment amount to reflect ESRD-related Part D drug costs. The proposed rule also describes three quality measures pertaining to hemodialysis adequacy and anemia management that CMS plans to use for its quality incentive program (QIP), and it lays out a conceptual model for tying payment to quality performance (CMS plans to adopt the QIP through a separate rulemaking process). CMS will accept comments on the proposed rule through November 16, 2009. CMS is hosting a town hall meeting on October 23, 2009 to discuss its proposed Medicare ESRD PPS rule; the registration deadline is October 2, 2009.

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On September 16, 2009, CMS published a final rule that implements a provision of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 that prohibits recouping Medicare overpayments from a provider or supplier that seeks a reconsideration from a Qualified Independent Contractor (QIC) and changes how interest is to be paid to a provider or supplier whose overpayment is reversed at subsequent administrative or judicial levels of appeal. The final rule describes the overpayments to which the limitation applies, how the limitation works in concert with the appeals process, and the change in CMS’s obligation to pay interest to a provider or supplier whose appeal is successful at levels above the QIC. The rule is effective November 16, 2009.

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On September 25, 2009, CMS published a notice announcing the annual adjustment in the amount in controversy (AIC) threshold amounts for Administrative Law Judge (ALJ) hearings and judicial review under the Medicare appeals process. Specifically, the 2010 AIC threshold amounts are $130 for ALJ hearings and $1,260 for judicial review, effective for requests for ALJ hearings and judicial review filed on or after January 1, 2010. 

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On September 25, 2009, CMS published a notice correcting technical errors in the August 11, 2009 Medicare skilled nursing facility (SNF) PPS final rule (two typographical errors and a technical error in the wage index values).

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On September 16, 2009, CMS published a proposed rule regarding the methodology and procedures for determining state Children's Health Insurance Program (CHIP) allotments, as provided under the Children's Health Insurance Program Reauthorization Act of 2009 and other related legislation. CMS will accept comments on the proposed rule until November 16, 2009.

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The Health Resources and Services Administration (HRSA) published a final notice on September 1, 2009 on how children’s hospitals that meet certain requirements may participate in the “340B” program, under which prescription drug manufacturers provide discounted drugs to certain eligible entities. The notice also informs discusses the obligation of manufacturers to provide the statutorily-mandated discount to those children’s hospitals. The notice is effective September 1, 2009.

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The Agency for Healthcare Research and Quality (AHRQ) has published a notice announcing an updated version of the common definitions and reporting formats that allow healthcare providers to voluntarily collect and submit standardized information regarding patient safety events under the Patient Safety and Quality Improvement Act of 2005. The notice also describes AHRQ’s process for continued development and refinement of the common formats.

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On August 24, 2009, the Department of Health and Human Services (HHS) issued an interim final rule with comment period to implement an American Recovery and Reinvestment Act of 2009 provision requiring notification of breaches of unsecured protected health information. For purposes of determining what information is “unsecured protected health information,” HHS also is updating its guidance specifying the technologies and methodologies that render protected health information unusable, unreadable, or indecipherable to unauthorized individuals. The interim final rule is effective September 23, 2009. HHS will accept comments on the interim final rule until October 23, 2009, while comments on information collection requirements associated with the rule are due by September 8, 2009. In a related development, on August 25, 2009, the Federal Trade Commission (FTC) published a final rule that requires vendors of personal health records and related entities to notify consumers when the security of their individually identifiable health information has been breached, in compliance with the ARRA. The FTC rule is effective September 24, 2009, and full compliance is required by February 22, 2010. A Reed Smith analysis of the FTC rule is posted here, and a summary of the HHS rule is available here.   

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On August 25, 2009, the HHS Office for Civil Rights (OCR) published a direct final rule adjusting for inflation the maximum civil money penalty amounts for violations of the confidentiality provisions of the November 21, 2008 Patient Safety and Quality Improvement Rule. The inflation adjustment is being made to comply with the Federal Civil Penalties Inflation Adjustment Act of 1990, and is effective November 23, 2009. The OCR is using direct final rulemaking for this action because it expects no significant adverse comment on the rule. If adverse comment is received by September 24, 2009 on a companion proposed rule, OCR will withdraw the direct final rule.  

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The HHS Office of Inspector General (OIG) has issued a report on the Medicaid Statistical Information System (MSIS) that concludes that MSIS data -- the only source of nationwide Medicaid claims and beneficiary eligibility information -- were not timely, accurate, or comprehensive for fraud, waste, and abuse detection. The OIG notes opportunities to improve and expand Medicaid data collection and reporting to further assist in fraud, waste, and abuse detection.  

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The HHS Emergency Care Coordination Center has issued a request for information (RFI) that will be used to help development demonstration programs that design and evaluate innovative models of regionalized, coordinated and accountable emergency care and trauma systems. Responses to the RFI will be accepted until September 30, 2009. 

 

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On August 4, 2009, the Department of Health and Human Services (HHS) published a notice delegating to the Director of the Office for Civil Rights (OCR) the authority to administer and enforce the HIPAA Security Rule, functions which previously had been delegated to CMS. HHS expects that combining the authority for administration and enforcement of the federal HIPAA standards for health information privacy and security under OCR will eliminate duplication and increase efficiencies in how HHS protects health information. 

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On August 4, 2009, HHS published a notice with comment period describing the methodology for calculating the higher federal matching funds available under the American Recovery and Reinvestment Act of 2009 (ARRA). Specifically, the ARRA provides for temporary increases in the Federal Medical Assistance Percentage (FMAP) rates to provide fiscal relief to states and to protect and maintain state Medicaid programs in a period of economic downturn. The increased FMAP rates apply during a recession adjustment period (October 1, 2008 through December 31, 2010). The percentages listed in the rule are for the third quarter of FY 2009, beginning April 1, 2009 and ending June 30, 2009. HHS will accept comments on the rule through August 19, 2009. 

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The HHS Office of Inspector General (OIG) has issued it Annual Report on the State Medicaid Fraud Control Units (MFCU) for FY 2008. During this period, MFCUs: recovered more than $1.3 billion in court-ordered restitution, fines, civil settlements, and penalties; obtained 1,314 convictions; and reported 971 civil settlements and/or judgments. 

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The OIG has issued a report identifying a number of potential vulnerabilities associated with Medicare payment for Part B services billed by physicians but performed by nonphysicians under the "incident to" rule. In particular, the OIG raised concerns regarding the performance of invasive services by unqualified nonphysicians. The OIG recommends revisions to the "incident to" rule, including new limits on the circumstances under which physicians who do not personally perform the services may bill Medicare.  

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The OIG has issued a report entitled “Part B Services During Non-Part A Nursing Home Stays: Durable Medical Equipment.” The OIG found that $30 million was inappropriately allowed for DME during non-Part A skilled nursing facility stays in 2006, most of which were also certified by Medicaid. Also, the OIG found that nearly $11.9 million more was inappropriately allowed by Part B during Medicaid nursing facility stays and distinct-part nursing home stays providing primarily skilled care. The OIG recommends that CMS take a number of steps to prevent inappropriate payments.

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A new OIG report concludes that 86% of group 2 support surface claims for the first half of 2007 did not meet Medicare coverage criteria, resulting in an estimated $33 million in inappropriate payments. The OIG recommends that CMS take a series of steps to prevent improper payments for these products, including additional prepayment and postpayment medical reviews.

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On August 5, 2009, CMS published a correction to its July 13, 2009 proposed rule on Medicare physician fee schedule payments and policies for calendar year (CY) 2010. The notice makes technical questions and adds quality reporting measures regarding Functional Communications. CMS also has published a notice correcting typographical errors that appeared in its May 1, 2009 notice on Medicare inpatient psychiatric facilities prospective payment system (PPS) rates effective July 1, 2009. In addition, on August 13, 2009, CMS republished its August 6, 2009 Medicare home health PPS proposed rule for CY 2010 to correct data in the tables.

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The Centers for Medicare & Medicaid Services (CMS) recently issued a number of major Medicare payment rules. These include final fiscal year 2010 rules regarding Medicare payment for inpatient hospital, long-term care hospital, skilled nursing facility, inpatient rehabilitation facility, and hospice services, along with a proposed calendar year (CY) 2010 rule updating Medicare payments for home health services. CMS also has announced a detailed timeline for the Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program Round One Rebid. These developments are summarized below.   

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On July 31, 2009, the Centers for Medicare & Medicaid Services (CMS) released its final fiscal year (FY) 2010 Medicare policies and payment rates for acute inpatient prospective payment system (IPPS) hospitals. The rule reflects a 2.1% market basket update, derived using a rebased and revised market basket. In order to receive the full market basket update, hospitals must successfully participate in the Hospital Quality Data for Annual Payment Update (RHQDAPU) program; hospitals that do not participate in the quality reporting program will get the update less 2 percentage points. In a significant change from the proposed rule, CMS has decided not to implement a negative 1.9% across-the-board budget neutrality adjustment to compensate for higher aggregate payments resulting from changes in hospital coding practices associated with the new Medicare Severity Diagnosis-Related Groups (MS-DRGs) patient classification system that do not, in CMS' view, reflect increases in patient acuity. Based on public comments, CMS has decided not to make the adjustment in FY 2010 without complete data on FY 2009 spending, but the agency will consider phasing in future adjustments over an extended period beginning in FY 2011 depending on further data analysis. CMS also is not making any policy changes related to MS-DRG relative weights in FY 2010. Among other things, the final rule also: adds four new measures for reporting under the RHQDAPU program; increases the outlier threshold to $23,140 (compared to $24,240 in the proposed rule), provides teaching hospitals with the full capital indirect medical education adjustment in FY 2010 (instead of finalizing CMS’s proposal to phase out the adjustment); establishes a 68.8% labor-related share for FY 2010; adjusts payment for disproportionate share hospitals, modifies regulations regarding the waiver of Emergency Medical Treatment and Labor Act (EMTALA) sanctions during an emergency; continues implementation of wage index adjustments; clarifies the definition of a new medical residency training program; implements a number of revisions to critical access hospital policies; and finalizes MS-DRG reassignments for certain orthopedic procedures. The final rule also provides an update on the status of five applications for new technology add-on payments discussed in the proposed rule, three of which were subsequently withdrawn. CMS approved the Spiration® IBV® Valve System for new technology payment of up to $3,437.50 per case because the technology represents a new treatment option for patients with prolonged air leaks following certain lung surgeries and may prevent some patients from having to undergo another invasive lung surgery to resolve the air leak. CMS did not approve the LipiScan™ Coronary Imaging System for new technology add-on payment because CMS determined there was not sufficient available evidence to demonstrate that the technology represents a substantial clinical improvement relative to existing technologies. As discussed below, the IPPS rule also includes changes to the long-term care hospital (LTCH) payment policies. The rule is scheduled to be published in the Federal Register on August 27, 2009, and it generally is effective October 1, 2009.

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On July 31, 2009, CMS released its final rule updating long-term acute care hospitals (LTCH) prospective payment system (LTCH PPS) payments and policies for rate year (RY) 2010, which begins October 1, 2009. CMS is providing a 2.5% inflation update, resulting in $153 million in additional payments compared to FY 2009. The standard federal rate for RY 2010 is set at $39,896.65, an increase from $39,114.36 in RY 2009. This increase in the standard federal rate reflects the 2.5% market basket update less an adjustment of 0.5% to account for changes CMS attributes to documentation and coding practices that occurred in FY 2007. CMS is not adopting, however, its earlier proposal to adjust LTCH rates in 2010 by -1.3% to account for changes in documentation and coding in FY 2008 during the first year under the severity-adjusted patient classification system. The rule also: finalizes revisions to the Medicare severity long-term care diagnosis related group (MS-LTC-DRGs) classifications consistent with changes to the IPPS MS-DRGs; adopts a high cost outlier fixed loss amount of $18,425; sets the labor-related share at 75.779%; and establishes a cost-to-charge ratio ceiling of 1.232. In addition to these payment provisions, CMS is finalizing its June 3, 2009 interim final rule correcting FY 2009 LTCH PPS payments for patients discharged on or after June 3, 2009 through September 30, 2009. CMS also is finalizing two May 2008 interim final rules with comment period that implemented certain provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007 relating to payments to LTCHs and LTCH satellite facilities, the establishment of LTCHs and LTCH satellite facilities, and increases in beds in existing LTCHs and LTCH satellite facilities. The rule also includes an interim final rule with comment period implementing provisions of the American Recovery and Reinvestment Act that further amended provisions related to payments to LTCHs and LTCH satellite facilities and increases in beds in existing LTCHs and LTCH satellite facilities. With certain exceptions, the rule is effective October 1, 2009. The rule is scheduled to be published in the Federal Register on August 27, 2009.

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On July 31, 2009, CMS released its final Medicare IRF PPS update for FY 2010, which includes both payment updates and new coverage criteria. Specifically, the final rule provides a 2.5% MBI increase, which is estimated to increase payments by $145 million compared to 2009 levels, along with adjustments to the relative weights, outlier threshold, wage index, and facility level-adjustments. The standard federal rate for FY 2010 is set at $13,661, an increase from $12,958 in FY 2009. CMS also has adopted new coverage criteria, including requirements for preadmission screening, post-admission evaluations, and individualized treatment planning that emphasize the role of physicians in ordering and overseeing beneficiaries’ IRF care. Among other things, the rule requires IRF services to be ordered by a rehabilitation physician with specialized training and experience in rehabilitation services and be coordinated by an interdisciplinary team meeting the rule’s specifications. The interdisciplinary team must meet weekly to review the patient’s progress and make any needed adjustments to the individualized plan of care. IRFs must use qualified personnel to provide required rehabilitation nursing, physical therapy, occupational therapy, speech-language pathology, social services, psychological services, and prosthetic and orthotic services (CMS notes that it also is considering adopting specific standards on the use of group therapies at a future date). The rule also includes new documentation requirements, including a requirement that IRFs submit patient assessment data on Medicare Advantage patients. Note that while the final rule’s payment rate updates are effective for IRF discharges on or after October 1, 2009, CMS has adopted a January 1, 2010 effective date for the new coverage requirements to provide facilities more time to adapt their practices to comply with the new framework. In response to public comments, CMS also is moving these new coverage requirements to a new section of the Code of Federal Regulations to clarify that they do not change the criteria for determining whether a facility meets the “60 percent rule” for purposes of qualifying for payment under the IRF PPS. Under that rule, at least 60 percent of a facility’s patients in a year must have at least one of 13 specified conditions as the principal admitting diagnosis, or as a secondary diagnosis that requires an IRF level of care. The new coverage criteria will be used to determine whether individual claims are for reasonable and necessary services payable by Medicare. Companion changes to IRF-PPS policy also will be made through revisions to the Medicare Benefit Policy Manual. The official version of the rule is scheduled to be published on August 7, 2009.

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The final FY 2010 Medicare skilled nursing facility (SNF) prospective payment system (PPS) rule, which was released by CMS on July 31, 2009, reduces rates by 1.1% compared to FY 2009 levels. CMS adopted its controversial proposal to recalibrate case mix weights to compensate for increased expenditures resulting from refinements made in 2006. The recalibration reduces overall SNF PPS payments by 3.3% ($1.050 billion) in FY 2010. This decrease is partially offset by a 2.2% market basket index (MBI) update (a $690 million increase), resulting in the 1.1% negative update ($360 million). In the rule, CMS also finalizes its plans to establish a new Resource Utilization Groups, version 4 (RUG-IV) case-mix classification model for FY 2011, reflecting updated staff time measurement data from CMS’s Staff Time and Resource Intensity Verification (STRIVE) project and using the updated Minimum Data Set (MDS) 3.0 resident assessment instrument.  The official version of the rule is scheduled to be published August 11, 2009. The rule is effective October 1, 2009.

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CMS has released its final FY 2010 Medicare hospice wage index rule, which will increase hospice rates by 1.4% in FY 2010, compared to CMS’s earlier proposed rule which would have decreased rates by 1.1%. The rate increase reflects a 2.1% increase in the hospital market basket, offset by a 0.7% decrease resulting from the phase out of the hospice wage index budget neutrality adjustment factor (BNAF). In a change from the proposed rule, CMS is phasing out the BNAF reduction over 7 years, with a 10% BNAF reduction in FY 2010 and successive 15% reductions from FY 2011 through FY 2016. CMS notes that “[t]his more gradual phase-out provides opportunity for CMS to consider the effects of a reduction in payments in the context of hospice payment reform, which is under consideration.” The rule also will, among other things, revise the process for certification and recertification of terminal illness by requiring physicians to provide a brief narrative explanation to support a patient’s life expectancy of 6 months or less. The rule is effective October 1, 2009. The official version of the rule will be published August 6, 2009.

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CMS’s proposed rule updating the Medicare home health PPS (HH PPS) would reduce Medicare home health spending by $100 million compared to CY 2009. The reimbursement cut reflects a 2.2% home health MBI increase ($390 million), offset by the distributional effects of an updated wage index (-$10 million), and a 2.75% decrease resulting from the third year of a 4-year phase-in of adjustments to rates to account for case-mix changes (-$480 million) and other policy changes. Note that the home health MBI update would be reduced by 2 percentage points to 0.2% for CY 2010 for those HHAs that do not submit required quality data. CMS also proposes changes to the outlier payment policy that seek to respond to “overwhelming evidence showing a small, but growing number of home health providers have been abusing the system, especially in certain parts of the country.” Specifically, CMS proposes a 10% per agency cap on outlier payments and a reduction in the target for total aggregate outlier payments (2.5% of total HH PPS payments, compared to the current 5% target), with a corresponding 2.5% increase in HH PPS rates. The rule also would: require the submission of Outcome and Assessment Information Set (OASIS) data as a condition for payment under the HH PPS; make payment and enrollment “safeguards”; clarify coverage of skilled services and routine medical supplies; and update condition of participation. CMS also is soliciting comments on: physician/patient interaction regarding the home health plan of care; expansion of quality reporting to include the Consumer Assessment of Healthcare Providers and Systems (CAHPS) Home Health Care Survey; use of OASIS Version C beginning in 2010; and proposed pay-for-reporting measures for use in CY 2011. Comments on the proposed rule will be accepted until September 28, 2009. The official version of the rule will be published in the Federal Register on August 6, 2009.

Update:  CMS published guidance in December 2009 on Medicare's new home health outlier policy.

 

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The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule to implement provisions from the Children's Health Insurance Program Reauthorization Act of 2009 with regard to the Medicaid Eligibility Quality Control (MEQC) and Payment Error Rate Measurement (PERM) programs. The rule also would also codify several procedural aspects of the process for estimating improper payments in Medicaid and the Children's Health Insurance Program (CHIP). CMS is accepting comments on the proposed rule until August 14, 2009. 

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CMS is soliciting proposals for private, for-profit Program of All-Inclusive Care for the Elderly (PACE) demonstration projects. The PACE program provides a comprehensive service delivery system and integrated Medicare and Medicaid financing targeting all services necessary for long-term care clients. Proposals must be submitted by July 26, 2010.

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The HHS Office of Inspector General (OIG) has issued a report entitled "Miscoded Claims for Power Wheelchairs in the Medicare Program." According to the OIG, 7% of Medicare standard rehabilitation power wheelchair claims and 23% of complex rehabilitation power wheelchair claims from the first half of 2007 were miscoded because the supplier used procedure codes that did not match the wheelchairs' model information. The OIG believes suppliers may need additional education on power wheelchair coding, and CMS can improve its review of power wheelchair claims.

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The OIG reports that 20 high-use counties with 6% of Medicare beneficiaries accounted for 16% of Part B spending on ultrasound services in 2007. In addition, the OIG believes that 3.2 million ultrasound claims (almost one in five nationwide) might be inappropriate. The OIG recommended that CMS monitor ultrasound claims data to detect and review questionable claims prior to payment, and take certain action when providers bill for high numbers of questionable claims; CMS concurred.

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An OIG report on the Medicare Prescription Drug Plan Finder found that Plan Finder Part D drug price data frequently overestimate the charges to beneficiaries when they have their prescriptions filled at the pharmacy. Specifically, based on a review of 10 drugs commonly used by seniors, the Plan Finder drug prices were a median of 28% higher than actual drug costs, and exceeded actual drug costs for 92% of claims. The OIG recommended that CMS take steps to ensure that Plan Finder drug prices accurately reflect actual drug costs. 

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The OIG has issued a report on “Variation in the Clinical Laboratory Fee Schedule,” in which the OIG recommends that CMS seek legislative authority to establish a new process for setting laboratory test payment rates. According to the OIG, 97% of lab tests had at least one carrier rate that varied from the national limit amount. Setting all carrier rates at 73% of the median carrier rate (rather than the current 74% rate) would have eliminated variation without a change in overall Medicare payments. CMS stated that it is committed to improving payment policies for lab tests and to refining methodologies for setting new payment rates, and it will consider the OIG’s recommendation (although it did not endorse the measure at this time).  

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According to a recent Government Accountability Office (GAO) report, the FDA faces challenges fulfilling its growing medical product oversight responsibilities, particularly those not funded by industry user fees. While FDA reports that funding levels allow it to address the most urgent needs and priorities, the agency did not receive enough resources to meet some statutory requirements, such as biennially inspecting certain manufacturing establishments. The GAO recommends that the FDA establish a comprehensive and reliable basis for substantiating the agency’s resource needs; the FDA concurred.

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On July 1, 2009, the Centers for Medicare & Medicaid Services (CMS) released the advance text of its proposed rule with comment period updating the Medicare physician fee schedule (MPFS) for calendar year (CY) 2010. Most notably, the proposed rule calls for a 21.5% across-the-board reduction in physician fee schedule payments under the statutory sustainable growth rate (SGR) formula. Over the past several years, Congress has repeatedly stepped in to block cuts triggered by the SGR formula, and such efforts are underway as part of broader health reform legislation, although the level of relief, if any, that may be provided is uncertain at this time. In the proposed rule, CMS has exercised its regulatory authority to remove drugs from the definition of “physicians’ services” for purposes of the SGR formula. CMS notes that spending on physician-administered drugs has risen faster than all other MPFS services, contributing significantly to the large projected reductions in future MPFS updates under the SGR formula. While this would not mitigate the projected negative 21.5% update for 2010, it would reduce the number of years in which negative updates are expected. In other policy areas the rule would, among many other things:

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On July 1, 2009, CMS released its proposed rule updating the Medicare hospital outpatient prospective payment system (HOPPS) and the ambulatory surgical center (ASC) payment system for 2010. With regard to the HOPPS update, CMS estimates that the rule would increase HOPPS rates by 1.9% compared to total spending in CY 2009. This reflects a 2.1% market basket increase (reduced for hospitals that do not report quality data, as discussed below), adjusted for changes in the pass-through estimate and estimated outlier payments and the expiration of special wage index payments. Other proposals affecting HOPPS payments and other policies include the following: 

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On June 30, 2009, CMS published a final rule delaying enforcement of a portion of a February 22, 2008 Medicaid provider tax rule that clarifies the standard for determining the existence of a “hold harmless” arrangement. This provision was already subject to a Congressional moratorium on enforcement until July 1, 2009; the final rule extends the delay in enforcement until June 30, 2010. 

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On June 30, 2009, CMS published a final rule rescinding three controversial Bush Administration Medicaid rules that also had been blocked by Congress. Specifically, CMS is withdrawing: a December 28, 2007 final rule regarding Medicaid payment for the costs of certain school-based administrative and transportation activities; a November 7, 2008 final rule clarifying the definition of Medicaid outpatient hospital services; and certain provisions of a December 4, 2007 interim final rule with comment period on optional state case management services. In rescinding the rules, CMS cites concerns about “the potential restrictions on services available to beneficiaries and the lack of clear evidence demonstrating that the approaches taken in the regulations are warranted.” The rule is effective July 1, 2009.  

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The HHS Office of Inspector General (OIG) has issued a report on “Medicare Part B Chemotherapy Administration: Payment and Policy.” The OIG points out that while questionable claims exceeded $60 million from 2005 to 2007, Medicare data are insufficient to determine consistently whether chemotherapy administration payments are appropriate. The OIG recommends that CMS: (1) establish a process to determine which specific drugs qualify for the chemotherapy administration payment rate, (2) instruct carriers that have not done so to consider a probe review of unmatched chemotherapy administration claims, and (3) ensure that drug administration claims are coded correctly and paid appropriately.

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On June 22, 2009, the Centers for Medicare & Medicaid Services (CMS) published an advance notice of proposed rulemaking announcing its intention to amend its regulations implementing Medicaid home and community-based services waivers under section 1915(c) of the Social Security Act. The notice solicits advance public comments on the merits of providing states the option to combine or eliminate the existing three permitted waiver targeting groups (i.e., aged or disabled, or both; mentally retarded or developmentally disabled, or both; and mentally ill). Comments also are solicited on the most effective means to define home and community. Comments will be accepted until August 21, 2009.  

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On June 3, 2009, the Centers for Medicare & Medicaid Services (CMS) published two regulations impacting payments under the long-term care hospital (LTCH) prospective payment system (PPS). First, CMS published an interim final rule with comment period revising the Medicare severity long-term care diagnosis-related group (MS-LTC-DRG) relative weights for federal fiscal year (FY) 2009 due to the misapplication of CMS’s established methodology in the calculation of the budget neutrality factor in the final rule. This error resulted in relative weights that are higher, by approximately 3.9%, or $130 million for all of FY 2009 (October 1, 2008 through September 30, 2009). However, due to agency limitations on retroactive rulemaking and prospective adjustments to rectify prior errors, CMS is only applying the corrected weights to the remainder of FY 2009 (that is, from June 3, 2009 through September 30, 2009). CMS estimates the changes will decrease aggregate LTCH PPS payments by approximately $43 million (or approximately 0.9%) for all LTCHs through the end of FY 2009. CMS will accept comments on the interim final rule until June 29, 2009. Second, CMS has issued a “supplemental” proposed rule revising the proposed rate year (RY) 2010 MS-LTC-DRG relative weights and the proposed RY 2010 high cost outlier fixed-loss amount included in its May 22, 2009 proposed rule based on the revised FY 2009 MS-LTC-DRG relative weights contained in the interim final rule. CMS estimates that under the supplemental rule, payments to LTCHs would increase by approximately $101 million (or about 2.2%) from FY 2009 to RY 2010. Note that this estimate is 0.6% lower than the 2.8% increase originally stated in the May 2009 RY 2010 proposed rule. Comments will be accepted on the supplemental rule through June 30, 2009.

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A Department of Health and Human Services (HHS) Office of Inspector General (OIG) audit found that HHS correctly calculated temporary increases in Medicaid’s Federal Medical Assistance Percentages (FMAP) in accordance with Recovery Act requirements.

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The OIG has released its annual “Compendium of Unimplemented Office of Inspector General Recommendations,” outlining previous OIG recommendations that the agency believes could achieve substantial savings and increase the effectiveness of HHS programs. Priority recommendations listed in the report address the following issue areas:

• Oversight of Medicare Part D -- Ensure accurate Medicare Part D sponsors bids and prospective payments; and implement safeguards to prevent and detect fraud and abuse in Medicare prescription drug plans.
• Medicare Integrity -- Ensure DME suppliers’ compliance with Medicare standards, modify Medicare hospital bad debt policy; reduce the rental period for Medicare home oxygen equipment; modify payments to managed care organizations; place a ceiling on administration costs included in managed care organizations’ rate proposals; and improve CMS performance evaluation process for program safeguard contractors.
• Medicaid and SCHIP Integrity -- Extend additional rebate payment provision to generic drugs; limit enhanced payments to cost and require that Medicaid payments returned by public providers be used to offset the federal share, resolve excessive Medicaid disproportionate share hospital payments; ensure Medicaid reimbursement for brand-name and generic drugs accurately reflects pharmacy acquisition costs, and link Medicaid drug rebate and drug reimbursement calculations.
• Quality of Care -- Ensure the appropriate processing of denial of Medicare payment remedies for noncompliant nursing homes; and improve Medicare hospice oversight.
• Oversight of Food, Drugs, and Medical Devices -- Update and maintain an accurate new drug code directory; improve FDA postmarketing oversight of drugs.
• Grants Management -- Increase oversight of NIH’s grantee institutions to ensure their compliance with federal financial conflict-of-interest regulations.
• Ethics Program Oversight and Enforcement -- Strengthen FDA oversight of clinical investigators.

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The OIG has issued a report entitled “Medicare Part D Payments for Beneficiaries in Part A Skilled Nursing Facility Stays in 2006.” The OIG concluded that the majority of the $75 million in Medicare Part D payments on behalf of beneficiaries in Part A SNF stays in 2006 “were most likely inappropriate,” since they may have been used in the facility or to facilitate the beneficiaries’ discharge, in which case they should have been excluded from Part D (with certain exceptions). The OIG recommends that CMS: provide additional guidance about when Parts A and D can pay for drugs for beneficiaries preparing for discharge; educate SNFs, pharmacies, and Part D sponsors that drugs covered under Parts A or B for beneficiaries in SNF stays are not eligible for Part D coverage; implement retrospective reviews; and follow up with the SNFs and pharmacies responsible for a large percentage of Part D payments for beneficiaries in Part A SNF stays.

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The OIG has released a report summarizing state fraud and abuse safeguard activities related to Medicaid NEMT. According to the OIG, such safeguard activities include screening providers, requiring prior approval for services, and other methods to prevent and detect improper payments. OIG also found that state Medicaid fraud control units investigated a total of 509 NEMT fraud and abuse cases from 2004 to 2006, with the most common types involving billing for services not rendered, unspecified overbilling, and upcoding.

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A new GAO report on emergency department overcrowding concludes that emergency department crowding continues to occur in hospital emergency departments, with about one-fourth of hospitals reporting diverting ambulances at least once in 2006. Wait times in emergency department have increased nationally, and in some cases exceeded recommended time frames. Boarding of patients in the emergency department while awaiting transfer to an inpatient bed or another facility continues to be reported as a problem, but national data is limited. Based on articles and interviews, the GAO concludes that a lack of access to inpatient beds continues to be the main factor contributing to emergency department crowding.

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On May 11, 2009, the Department of Health and Human Services (HHS) published its semiannual regulatory agenda, outlining planned regulatory initiatives in a number of health policy areas. The notice points out that due to the timing of the release of the agenda, it does “not necessarily reflect the policy perspectives of the Obama Administration,” but the October 2009 agenda is expected to reflect the “current policy directions of the Obama Administration.”

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On May 1, 2009, the Centers for Medicare & Medicaid Services (CMS) released its proposed FY 2010 Medicare policies and payment rates for acute inpatient prospective payment system (IPPS) hospitals. CMS proposes a 2.1% market basket update, derived using a proposed rebased and revised market basket update based on data from FY 2006 (rather than FY 2002). However, that inflation increase would be offset largely by a negative 1.9% across-the-board budget neutrality adjustment to compensate for higher aggregate payments resulting from changes in hospital coding practices associated with the new Medicare Severity Diagnosis-Related Groups (MS-DRGs) patient classification system that do not, in CMS' view, reflect increases in patient acuity. Overall, the policy and payment changes in the rule is expected to decrease average IPPS payments by 0.5%. CMS notes that the proposed 1.9% budget neutrality reduction does not fully offset higher payments since the MS-DRG system was adopted in FY 2008. Based on current estimates, CMS expects that total adjustments of approximately 8.5% eventually will need to be made, which would require additional cuts totaling approximately 6.6% in FY 2011 and FY 2012.  CMS is requesting public comment on the magnitude of the adjustment for FY 2010. In other provisions of the rule, CMS continues to link the inflation update to the reporting of quality measures. Specifically, hospitals that successfully report the 2010 quality measures included in the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program will get the full market basket update, while hospitals that do not participate in the quality reporting program will get the update less 2 percentage points. The proposed rule adds four new measures for reporting under the RHQDAPU program. Moreover, the proposed rule increases the outlier threshold to $24,240, includes payment adjustments affecting teaching hospitals and disproportionate share hospitals, clarifies the Emergency Medical Treatment and Labor Act (EMTALA) regulations, and discusses five applications for new technology add-on payments. The IPPS rule also includes changes to the long-term care hospital (LTCH) payment policies. The rule is scheduled to be published in the Federal Register on May 22, 2009. Comments on the proposed rule are due by June 30, 2009.

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This post was written by Paul W. Pitts, Jason M. Healy, and Debra A. McCurdy.

In tandem with the IPPS proposed rule, CMS released its annual payment update for the FY 2010 long-term acute care hospital (LTCH) PPS. For FY 2010, CMS projects a 2.8% increase in payments under LTCH-PPS, resulting in $135 million in additional payments compared to FY 2009. The proposed standard federal rate will be $39,349.05, up from $39,114.36 in FY 2009. The proposed 0.6% increase in the standard federal rate is based on the market basket update of 2.4%, offset by a negative 1.8% adjustment to account for changes in documentation and coding practices that do not reflect increases in patient severity. The remaining 2.2% estimated increase in payments relates to proposed payment changes that affect high cost outlier and short stay outlier cases. CMS seeks comments on the 1.8% adjustment, along with comments on whether to implement a stand-alone market basket for each type of hospital excluded from the IPPS. CMS also proposes to revise the Medicare severity long-term care diagnostic related groups (MS-LTC-DRGs) classifications consistent with changes to the IPPS MS-DRGs. The proposed rule also sets forth a fixed loss amount of $16,059 and a ceiling on the LTCH cost-to-charge ratio of 1.227. In addition to these payment provisions, CMS proposes to amend the “separateness criteria” to provide more consistent criteria for satellite facilities and hospitals-within-hospitals. The official version of the rule is scheduled to be published on May 22, 2009. Comments are due by June 30, 2009.

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On May 1, 2009, CMS released its proposed skilled nursing facility (SNF) PPS rule for FY 2010, which would reduce Medicare SNF PPS payments by $390 million, or 1.2%, compared to FY 2009 levels. CMS is again proposing a controversial provision considered but not adopted for FY 2009 that would recalibrate case mix weights to compensate for increased expenditures resulting from refinements made in 2006. The recalibration would reduce overall SNF PPS payments by 3.3% ($1.050 billion) in FY 2010.  This decrease would be partially offset by a 2.1% market basket update (a $660 million increase), resulting in the 1.2% negative update. In the rule, CMS also proposes establishing a new RUG-IV case-mix classification model for FY 2011 reflecting updated staff time measurement data from CMS’s Staff Time and Resource Intensity Verification (STRIVE) project and using the updated Minimum Data Set (MDS) 3.0 resident assessment instrument. CMS also requests public comments on: a possible requirement for quarterly reporting of nursing home staffing data; a possible new rate component to account for the use of non-therapy ancillaries; and quality monitoring for rural swing-bed hospitals. The official version of the rule is scheduled to be published on May 12, 2009. CMS will accept comments on the rule until June 30, 2009.

** 5/11/09 update:  The official Federal Register version is posted here.

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This post was written by Paul W. Pitts, Scot T. Hasselman, and Debra A. McCurdy.

On May 6, 2009, CMS published its proposed IRF PPS update for FY 2010. For FY 2010, CMS proposes to apply a 2.4% market basket increase, which is estimated to increase payments under IRF-PPS by $140 million. The rule also would increase the outlier threshold amount, resulting in an additional $10 million increase in aggregate IRF-PPS payments. In addition to updating the payment methodology, including adjustments to the relative weights, market basket and outlier threshold, CMS is proposing the most dramatic changes to the IRF-PPS since it adopted changes to the IRF “75 percent rule” criteria for cost reporting periods beginning on or after July 1, 2004 . Specifically, the rule would impose extensive preadmission screening requirements, increase the responsibilities of physicians, require additional face-to-face encounters with patients, mandate that physicians and nurses have specialized training in rehabilitation, revise the post admission evaluation process, and require IRFs to create and maintain additional documents in the patient medical record, in addition to other obligations. Companion changes to IRF-PPS policy are included in proposed revisions to Section 110 of the Medicare Benefit Policy Manual. Comments on the proposed rule are due June 29, 2009, and comments on the proposed revisions to the Medicare Benefit Policy Manual are due June 30, 2009.

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On May 1, 2009, CMS published a notice updating Medicare inpatient psychiatric facility (IPF) PPS payments for rate year 2010, which begins July 1, 2009. CMS estimates that the notice will increase payments to IPFs by about 2.0% overall, taking into account a 2.1% market basket update offset somewhat by an increase to the outlier fixed dollar loss threshold amount. CMS waived issuance of a proposed rule in this case because it is not making any substantive changes in policy, but only applying previously-established methodologies. Nevertheless, CMS will accept comments on the update until June 30, 2009. In particular, CMS solicits data on variations in cost structures between freestanding and hospital-based IPFs to assist CMS in developing a stand-alone IPF market basket, and it is requesting information on the cap on full-time equivalent residents that may be used to calculate the IPF PPS teaching status adjustment.

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On May 6, 2009, CMS published a proposed rule further delaying enforcement of certain provisions of a February 22, 2008 Medicaid provider tax rule already subject to a Congressional moratorium. Specifically, CMS is delaying until June 30, 2010 enforcement of the rule’s provision clarifying the standard for determining the existence of a “hold harmless” arrangement. The current Congressional moratorium on enforcement of this provision expires July 1, 2009. CMS is accepting comments on the delay through June 1, 2009.

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On May 6, 2009, CMS published a proposed rule that would rescind three controversial Bush Administration Medicaid rules that have been blocked by Congress. Specifically, the rule would withdraw: a December 28, 2007 final rule regarding Medicaid payment for the costs of certain school-based administrative and transportation activities; a November 7, 2008 final rule clarifying the definition of Medicaid outpatient hospital services; and certain provisions of a December 4, 2007 interim final rule with comment period on optional state case management services. In proposing to rescind the rules, CMS cited concerns about “the potential restrictions on services available to beneficiaries, potential deleterious effect on state partners in the economic downturn, and the lack of clear evidence demonstrating that the approaches taken in the regulations are warranted.” CMS is accepting comments on the rulemaking through June 1, 2009, including comments on, among other things, problems that could result from rescission of the rules and whether the objectives of the rules might also be accomplished through alternative approaches, such as program guidance and technical support. 

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On May 8, 2009, HHS published an advance notice of proposed rulemaking seeking comments on whether the HHS should amend its regulations on the responsibility of applicants for promoting objectivity in research for which Public Health Service (PHS) funding is sought. Specifically, HHS is considering whether to revise current regulations to provide a more rigorous approach to investigator disclosure, management of conflicts, and federal oversight. The notice invites comments on a range of related issues, including: the scope of the regulation and disclosure of interests; the definition of a “significant financial interest”; identification and management of conflicts; how to assure institutional compliance; reporting on conflicts of interest; and standards regarding institutional conflict of interest. Comments will be accepted until July 7, 2009.

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CMS and the Internal Revenue Service have filed a joint notice seeking comments on certain issues under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 in advance of future rulemaking. The notice requests information on such issues as: financial requirements and treatment limitations associated with certain health benefits, criteria for medical necessity and coverage determinations with respect to mental health or substance use disorder benefits, and out-of-network coverage issues, among others. In addition, the notice seeks comments on various issues related to direct and indirect costs to group health plans, health insurance issuers, businesses, and other stakeholders associated with implementation of the law. Comments are due by May 28, 2009. 

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On April 24, 2009, CMS published its proposed FY 2010 Medicare hospice wage index rule. The proposed rule would continue the phase-out of the wage index budget neutrality adjustment factor (BNAF), which will conclude in 2011. It also would revise the process for certification and recertification of terminal illness by requiring a brief narrative explanation of the clinical findings that support a life expectancy of 6 months or less. In addition, CMS is requesting comments on requiring recertification visits by physicians or advanced practice nurses (e.g., nurse practitioners), and on issues of payment reform for use in possible future policy development. The proposed rule also would make several technical and clarifying changes to the current hospice regulations. CMS estimates that total Medicare hospice payments for FY 2010 will decrease by $340 million as a result of the application of the reduction in the BNAF and the updated wage data. This estimate does not take into account a hospital market basket update, however, which is currently estimated to be about 2.1% for FY 2010, and which would result in a $240 million increase in payments to hospices. The combined impact of the market basket update, the BNAF reduction, and the updated wage data is expected to decrease Medicare hospice payments by a total of $100 million in FY 2010. CMS will accept comments on the rule until June 22, 2009. 

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On April 17, 2009, CMS announced that it is not further delaying implementation of its January 16, 2009 interim final rule with comment period making changes to the Medicare durable medical equipment, prosthetic, orthotics and supplies (DMEPOS) competitive bidding program. The effective date of the rule had previously been delayed from February 17, 2009 until April 18, 2009 to give HHS officials the opportunity for further review of the issues of law and policy raised by the rule.  CMS notes that its decision to allow the rule to go into effect will have “no immediate effect on the Medicare DMEPOS benefit and Medicare beneficiaries may continue to use their current DMEPOS suppliers at this time.” CMS will be issuing future guidance on the timeline for the Round 1 re-bid, which must take place in 2009 under the Medicare Improvements for Patients and Providers Act of 2008.

 

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On April 17, 2009, HHS issued guidance specifying the technologies and methodologies that render protected health information unusable, unreadable, or indecipherable to unauthorized individuals, as required by the American Recovery and Reinvestment Act of 2009 (ARRA). This guidance was developed through a joint effort by the HHS Office for Civil Rights, Office of the National Coordinator for Health Information Technology, and CMS. This guidance relates to two breach notification regulations – one forthcoming rule to be issued by HHS for covered entities and their business associates under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and one issued April 20 by the Federal Trade Commission (FTC) for vendors of personal health records and other non-HIPAA covered entities. If entities subject to the regulations apply the technologies and methodologies specified in the guidance to secure information, they will not be required to provide the notifications required by the regulations in the event the information is breached. In addition to this guidance, HHS has issued a request for information (RFI) soliciting public comment on the ARRA breach notification provisions to inform future rulemaking and updates to the guidance. Comments must be submitted by May 21, 2009.   The guidance is applicable upon issuance (April 17, 2009,), but will apply to breaches 30 days after publication of forthcoming interim final regulations. If HHS determines that the guidance should be modified based on public comments, the Department will issue updated guidance prior to or concurrently with the regulations. The FTC rule, which requires vendors of personal health records and related entities to notify individuals when the security of their individually identifiable health information is breached, is subject to public comment through June 1, 2009.  

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The National Institutes of Health (NIH) is requesting public comment on draft guidelines entitled "National Institutes of Health Guidelines for Human Stem Cell Research."   The draft guidelines are designed to implement President Obama’s March 9, 2009 Executive Order on stem cell research as it pertains to extramural NIH-funded research, including informed consent procedures. Under the draft guidelines, NIH could fund research using human embryonic stem cells that were derived from embryos created by in vitro fertilization (IVF) for reproductive purposes and were no longer needed for that purpose, and funding would continue to be allowed for human stem cell research using adult stem cells and induced pluripotent stem cells (although there are some uses of human embryonic stem cells and human induced pluripotent stem cells that are nevertheless ineligible for NIH funding). NIH funding for research using human embryonic stem cells derived from other sources, including somatic cell nuclear transfer, parthenogenesis, and/or IVF embryos created for research purposes, is not allowed under these guidelines.  Comments must be received by May 26, 2009.  NIH also has issued an update on the status of ongoing research, and of applications pending review or to be submitted, prior to the issuance of final guidelines. 

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HHS has recalculated the Federal Medical Assistance Percentages (FMAPs) for the first two quarters of fiscal year (FY) 2009 pursuant to the American Recovery and Reinvestment Act (ARRA). The new percentages are effective from October 1, 2008 through March 31, 2009.

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CMS has sent a number of major Medicare reimbursement rules to the White House Office of Management and Budget (OMB) for final regulatory clearance before publication in the Federal Register. Among other things, OMB is reviewing proposed rules impacting Medicare payment policy for acute inpatient hospitals, long-term care hospitals, inpatient rehabilitation facilities, and skilled nursing facilities. The rules are not available at this time, but they are expected to be posted in the near future at the Federal Register web site. 

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The OIG has issued its quarterly report comparing Medicare Part B drug average sales prices (ASPs) and average manufacturer prices (AMPs), this one comparing third-quarter 2008 ASPs and AMPs and reviewing the impact on Medicare reimbursement for first quarter 2009. In the report, the OIG identified 36 HCPCS codes with ASPs that exceeded AMP by at least 5 percent in the third quarter of 2008.  If reimbursement amounts for these 36 codes had been based on 103 percent of the AMPs, Medicare expenditures would have been reduced by $9.4 million during the first quarter of 2009.  The OIG notes that could not compare ASPs and AMPs for 67 HCPCS codes because of missing AMP data; the OIG will continue to work with CMS to evaluate appropriate actions against manufacturers that fail to submit required data.

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The HHS Office of Inspector General (OIG) has issued a report entitled “MedicaidPayments for Outpatient Clinical Diagnostic Laboratory Services for Dual-Eligible Beneficiaries.” The OIG found that Medicaid programs in 8 of 11 selected states spent a total of $1.3 million in potential improper payments for clinical diagnostic laboratory services that were provided on an assignment-related basis to Medicare/Medicaid dual eligibles in FY 2005 and 2006. Over half of the potential improper payments identified corresponded to five Current Procedural Terminology codes (36415, 85025, 80053, 81000, and 87536). The OIG points out that state Medicaid programs should not pay for any portion of outpatient clinical diagnostic laboratory services that were provided on an assignment-related basis to dual eligibles who are enrolled in Medicare Part B.

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The Centers for Medicare & Medicaid Services (CMS) has published a notice announcing a delay in the effective date of its January 16, 2009 interim final rule with comment period implementing certain changes to the Medicare durable medical equipment, prosthetic, orthotics and supplies (DMEPOS) competitive bidding program mandated by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Specifically, the effective date has been delayed from February 17, 2009 until April 18, 2009 to give HHS officials the opportunity for further review of the issues of law and policy raised by the rule. CMS is seeking comments until March 23, 2009 on the delay. CMS points out that the original comment period on the January 16 rule remains unchanged; the public has until March 17, 2009 to submit comments on the substantive policy issues discussed in the rule.  

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On February 27, 2009, CMS published a notice announcing the continuation of a 2005 interim final rule regarding Medicare claims appeal procedures through March 1, 2010, since the agency was unable to meet the March 1, 2009 deadline for publication of the final rule. 

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This post was written by Karl A. Thallner, Jr., Carol C. Loepere, Debra A. McCurdy, Brad M. Rostolsky, Jacqueline B. Penrod, and Amie E. Schaadt.

On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”). The sweeping $790 billion economic stimulus package includes a number of health care policy provisions. Reed Smith's Health Care Memorandum summarizes the major health policy provisions of the Act.

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On February 10, 2009, CMS is publishing a notice announcing an additional comment period on its January 16, 2009 interim final rule implementing certain changes to the Medicare DMEPOS competitive bidding program mandated by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). That rule implements certain MIPPA provisions that delay implementation of Round 1 of the competitive bidding program; require CMS to conduct a second Round 1 competition in 2009; and mandate certain changes in the program, including a process for providing feedback to suppliers regarding missing financial documentation and a requirement for contractors to disclose to CMS information on subcontracting relationships. 

CMS is considering a 60-day delay in the original February 17, 2009 effective date to allow CMS officials the opportunity to further review the issues of law and policy raised by the rule, consistent with a broader regulatory review announced by the Obama Administration on January 20, 2009. CMS is soliciting comments on the potential delay, along with general comments on the rule. The deadline for comments under the new solicitation is February 12, 2009. 

The official Federal Register version of the notice will be available February 10. 

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On January 16, 2009, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period to implement the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding provisions in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Among other things, the rule codifies MIPPA provisions: delaying implementation of bidding and requiring CMS to conduct a second Round 1 competition in 2009; establishing a process to provide feedback to suppliers on missing financial documentation; requiring bidders to disclose information regarding subcontractors; and exempting certain DMEPOS items from bidding. CMS also notes that it intends to require one, rather than three, years of financial records to be submitted with future bids. In addition, CMS invites comments on alternatives for diabetic supplies bidding, which will be the subject of future rulemaking. The rule is effective February 17, 2009, but CMS will accept comments on the rule until March 17, 2009. A Reed Smith analysis of the MIPPA DMEPOS competitive bidding provisions is available here. In a related development, CMS announced the appointment of new members of the Program Advisory and Oversight Committee (PAOC), which advises the agency on the competitive bidding program.

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On January 16, 2009, CMS published an interim final rule with comment period to implement MIPPA provisions regarding protected classes of drugs under the Medicare Part D prescription drug benefit. For 2010, CMS is continuing to require Part D sponsors to include all or substantially all Part D drugs in the antidepressant, antipsychotic, anticonvulsant, immunosuppressant, antiretroviral, and antineoplastic classes for 2010. For contract years 2011 and beyond, any CMS modifications to the protected categories and classes will be made through rulemaking. CMS notes that to identify appropriate drug categories and classes for future revisions, it is beginning an extensive examination of widely-used drug treatment guidelines, analyzing Part D data, and planning validation review with input from an expert panel of physicians and pharmacists. The rule is effective January 16, 2009, and comments will be accepted until March 17, 2009. 

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The Department of Health and Human Services (HHS) published a final rule on January 16, 2009 adopting new code sets to be used by the public and private sectors for reporting diagnoses and inpatient procedures in health care transactions under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).  Specifically, the rule adopts the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD–10–CM) for diagnosis coding, and the International Classification of Diseases, Tenth Revision, Procedure Coding System (ICD–10–PCS) for inpatient hospital procedure coding. These codes replace the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM) Volumes 1 and 2, and the International Classification of Diseases, Ninth Revision, Clinical Modification Volume 3 for diagnosis and procedure codes, respectively. HHS notes that the shortcomings of the current ICD-9 system include limited ability to accommodate new procedures and diagnoses; lack of specificity and detail; inconsistent terminology, and lack of codes for preventive services. On the other hand, HHS expects adoption of the ICD-10 code set to support value-based purchasing and reporting of quality data and ensure more accurate payments for new procedures. While HHS believes the new systems will result in significant long-term savings, short-term implementation costs (training, productivity losses, and systems changes) could reach almost $2 billion. The rule is effective October 1, 2013, two years later than provided in the August 22, 2008 proposed rule. 

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On January 16, 2009, HHS published a final rule announcing updated HIPAA electronic transaction standards, including updated versions of the health care transactions standard (i.e., for claims, remittance, and eligibility requests) and the pharmacy claims transactions standard. The rule also adopts a standard for Medicaid pharmacy subrogation transactions, through which state Medicaid agencies recoup payments for pharmacy services when a third party payer has primary financial responsibility. The compliance date is January 1, 2012 (although small health plans have an additional year to comply with the Medicaid pharmacy subrogation standard). Separately, HHS published a notice announcing the Secretary’s recognition of certain Healthcare Information Technology Standards Panel Interoperability Specifications and the standards they contain as ‘‘Interoperability Standards’’ for health information technology.

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CMS published a proposed rule on January 16, 2009 that would amend the Clinical Laboratory Improvement Amendments of 1988 (CLIA) regulations for cytology proficiency testing. The rule would: amend definitions, lengthen the testing interval, require validation of cytology challenges before use in testing, increase the minimum number of cytology challenges per testing event, change the grading scheme, and allow flexibility to accommodate new cytology laboratory technologies. CMS will accept comments on the proposal until March 17, 2009.  

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HHS published a rule January 15, 2009 imposing registration requirements on institutional review boards (IRB) that review human subjects research conducted or supported by HHS and that are designated under an assurance of compliance approved for federal-wide use by the HHS Office for Human Research Protections (OHRP). The registration information will include contact information, numbers of all active protocols and active protocols involving research conducted or supported by HHS, and staffing for the IRB. The rule is effective July 14, 2009. Initial registration must be submitted by September 14, 2009, while IRBs currently registered with OHRP must comply by the three-year expiration date assigned by OHRP or within 90 days of certain IRB personnel changes. The FDA also issued a parallel rule to require IRBs to register through the HHS system and provide contact information and information on the number of active protocols involving FDA-regulated products and types of products reviewed. The rule is effective July 14, 2009, with a September 14, 2009 deadline for compliance with the initial registration requirement. In connection with the rule, the FDA released final guidance entitled “Adverse Event Reporting to IRBs -- Improving Human Subject Protection,” which is intended to help the research community interpret requirements for submitting reports of unanticipated problems, including certain adverse events reports, to IRBs. The document seeks to address concerns raised by the IRB community that increasingly large volumes of individual, unanalyzed adverse event reports are inhibiting the ability of IRBs to adequately protect human subjects.

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HHS is soliciting information on how it could better use its resources and authorities to encourage the development and use of new medical technologies, consistent with the goals of maintaining and improving the quality of care, controlling overall healthcare costs, and using timely and practical administrative procedures. Comments will be accepted until April 16, 2009. 

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On January 26, 2009, CMS published a notice correcting technical errors in the November 18, 2008 final Medicare hospital outpatient prospective payment system (OPPS) rule addressing the status indicator for new drug code. Also on January 26, CMS published corrections to its December 19, 2008 notice on Medicaid disproportionate share hospital allotments. 

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On January 2, 2009, the Centers for Medicare & Medicaid Services (CMS) published a final rule imposing surety bond requirements on certain Medicare suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). Specifically, suppliers generally will be required to post a $50,000 surety bond from an authorized surety, unless (1) the supplier is a high-risk supplier, in which case the bond amount will be increased, or (2) the supplier qualifies for an exemption from the surety bond requirement. A separate surety bond will required for each NPI obtained for DMEPOS billing purposes. With regard to high-risk suppliers, CMS requires an elevated surety bond amount of $50,000 per occurrence of an adverse legal action (e.g., revocation of Medicare billing number; suspension of a health care license by a state licensing authority; revocation or suspension of accreditation; felony conviction; or federal or state health care program exclusion or debarment) within the 10 years preceding enrollment, revalidation, or reenrollment. CMS has adopted exceptions to the surety bond requirement for physicians and nonphysician practitioners (NPPs) furnishing the items to their own patients as part of their professional service. Likewise, CMS has created an exception for the provision of orthotics, prosthetics, and supplies by (1) state-licensed orthotic and prosthetic personnel and (2) state-licensed physical and occupational therapists providing such items to their own patients. This exception is limited to personnel and therapists operating in private practice; medical supply companies employing such personnel or therapists do not qualify for this exception. An exception also applies to suppliers operated by a federal, state, local, or tribal government agency if the supplier has provided CMS with a comparable surety bond under state law. Despite requests by commenters, CMS did not establish exceptions for pharmacies or for nursing facilities that bill for Medicare DMEPOS services provided to their own residents. A supplier must submit the surety bond with its initial Medicare enrollment application or with its revalidation or reenrollment application. In addition, DMEPOS suppliers must submit a surety bond when a change of ownership occurs or when seeking to enroll a new location (unless the DMEPOS supplier is a sole proprietorship). The rule is effective March 3, 2009. Existing suppliers must comply with the surety bond requirement 9 months after enactment (October 2, 2009), while new enrolling suppliers or suppliers seeking to change ownership after the effective date must meet this requirement 120 days after the effective date (May 4, 2009).

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On January 12, 2009, CMS published a final rule that revises Medicare’s definition of Part D negotiated prices to require drug plan sponsors to use the amount paid to a pharmacy (rather than the sometimes lower "lock in price" paid to a pharmacy benefit manager) as the basis for determining cost sharing for beneficiaries and for reporting a plan’s drug costs to CMS. The rule also, among other things: requires new enrollees in special needs plans to be members of the population that the plan is designed to serve; permits CMS to impose on plans a civil money penalty of up to $25,000 for each enrollee adversely affected by a contract violation; codifies CMS policy regarding using the best available evidence to determine an enrollee’s eligibility for extra help through the Part D Low Income Subsidy program; prevents beneficiaries enrolled in Medicare Advantage and Part D plans who elect to have their premiums withheld from their Social Security payments from being double-billed for premiums; and requires Medicare Medical Savings Account plans to report cost and quality information to beneficiaries.  CMS also issued a related proposed rule providing CMS with the authority to "waive or modify" statutory requirements pertaining to the Retiree Drug Subsidy (RDS) program in order to facilitate the offering of a prescription drug plan covering employees or retirees has also been released. Comments on the proposed rule will be accepted until March 13, 2009.

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On January 2, 2009, the National Vaccine Program Office (NVPO) announced that it is seeking public comment on the Centers for Disease Control and Prevention’s Immunization Safety Office draft Scientific Agenda related to scientific research questions in vaccine safety. Comments will be accepted through February 2, 2009. 

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On December 31, 2008, CMS published a notice correcting a number of technical and typographical errors in the November 19, 2008 final Medicare physician fee schedule rule for calendar year 2009. In addition, on December 30, 2008, CMS published a notice correcting certain wage data included in the October 3, 2008 final FY 2009 Medicare hospital inpatient prospective payment system rule. 

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On December 19, 2008, the Centers for Medicare & Medicaid Services (CMS) published a final rule implementing provisions of the Medicare Modernization Act of 2003 related to state auditing and reporting of Medicaid disproportionate share hospital (DSH) payments, effective January 19, 2009. CMS also published a separate notice announcing the final federal share DSH allotments for federal fiscal year (FY) 2007 and the preliminary federal share DSH allotments for FY 2009. The notice also announces the final FY 2007 and the preliminary FY 2009 limitations on aggregate DSH payments that states may make to institutions for mental disease and other mental health facilities. 

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CMS published a final rule on December 19, 2008 that implements a provision of the Deficit Reduction Act of 2005 that provides states with additional flexibility to establish a non-emergency medical transportation brokerage program, and to receive the federal medical assistance percentage matching rate. The rule is effective January 20, 2009.

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CMS published a document on December 22, 2008 correcting technical errors that appeared in the November 3, 2008 notice updating Medicare home health agency (HHA) prospective payment system (PPS) rates for 2009. 

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On December 19, 2008, the Department of Health and Human Services (HHS) published a controversial final rule to implement and enforce certain federal nondiscrimination statutes protecting the conscience rights of health care providers and other entities. Among other things, the rule clarifies that non-discrimination protections allowing a provider to refuse to perform health care services to which they may object for religious, moral, ethical, or other reasons apply to institutional health care providers as well as to individual employees working for recipients of certain HHS funds; requires recipients of certain HHS funds to certify their compliance with laws protecting provider conscience rights; designates the HHS Office for Civil Rights as the entity to receive related discrimination complaints; and establishes compliance provisions, including termination and recoupment of funding paid in violation of the nondiscrimination provisions if voluntary compliance is not achieved.  The rule is effective January 20, 2009, although HHS components have been given discretion to phase in the written certification requirement by October 1, 2009 (the beginning of FY 2010).  

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On December 17, 2008, the HHS Office of Inspector General (OIG) published its annual solicitation of proposals and recommendations for new or revised safe harbor provisions under the federal anti-kickback statute, and new OIG special fraud alerts. The comment deadline is February 17, 2009. A status report on the comments the OIG received in response to last year's solicitation is set forth in Appendix D to the OIG’s Semiannual Report for the period of April 1, 2008 through September 30, 2008. 

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HHS has published the federal medical assistance percentages and enhanced federal medical assistance percentages for fiscal year (FY) 2010. The percentages in this notice apply to state expenditures for most medical services and medical insurance services, and assistance payments for certain social services. 

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On December 3, 2008, the Centers for Medicare & Medicaid Services (CMS) published a final rule to provide states with increased flexibility under an approved state plan to define the scope of covered Medicaid benefits, as authorized by the Deficit Reduction Act of 2005 (DRA). Under the rule, states may offer coverage of the following benchmark or benchmark-equivalent benefit packages to certain Medicaid recipients:  the standard Blue Cross/Blue Shield preferred provider option service benefit plan under the Federal Employees Health Benefit Plan; state employee coverage; coverage offered by the state’s largest commercial health maintenance organization; or coverage approved by the Secretary of the Department of Health and Human Services (HHS). The rule is effective February 2, 2009. Note that CMS characterizes the rule as a codification of guidance CMS issued on March 31, 2006 to state Medicaid directors, and the agency points out that states have already begun implementing this provision in advance of this final rule. 

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On December 3, 2008, CMS issued FY 2009 hospital wage index changes to implement Section 124 of the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA). The notice contains revised final wage indices and hospital reclassifications for 27 hospitals and are applicable for discharges beginning October 1, 2008. 

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On November 21, 2008, the Department of Health and Human Services (HHS) published a final rule to implement certain aspects of the Patient Safety and Quality Improvement Act of 2005 (Patient Safety Act). By way of background, the Patient Safety Act is designed to encourage health care providers to voluntarily report patient safety information, medical errors, and “near misses” to Patient Safety Organizations (PSOs). In order to facilitate such disclosure, the law creates certain legal privilege and confidentiality protections for any patient safety work product (PSWP) either developed by a PSO or prepared by a health care provider and delivered to a PSO. The final rule establishes a framework by which hospitals, doctors, and other health care providers may voluntarily report information to PSOs, on a privileged and confidential basis, for the aggregation and analysis of patient safety events. The regulation outlines the requirements that entities must meet to become PSOs and the processes by which the Secretary will review and accept certifications and list PSOs. It also describes the privilege and confidentiality protections for the information that is assembled and developed by providers and PSOs, the exceptions to these privilege and confidentiality protections, and the procedures for the imposition of civil money penalties for the knowing or reckless impermissible disclosure of patient safety work product. The final rule is effective January 19, 2009. When the final rule goes into effect, it will supersede interim guidance released October 14, 2008, although any information that became PSWP under the interim guidance criteria will remain PSWP, and thus privileged and confidential, after the interim period. 

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On November 24, 2008, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period making technical changes to the methodology used to compute each state's preliminary and final allotments available to pay the Medicare Part B premiums for qualifying individuals (QIs). The rule also contains charts providing the states' final QI allotments for the federal fiscal year (FY) 2008 and preliminary QI allotments for FY 2009. While the rule is effective November 24, 2008, the final allotments for FY 2008 are effective October 1, 2007 and the preliminary allotments for FY 2009 are effective October 1, 2008. CMS will accept comments on the rule until January 23, 2009.  

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On November 25, 2008, CMS published a final rule on Medicaid premiums and cost sharing to implement requirements of the Deficit Reduction Act of 2005 and the Tax Relief and Health Care Act of 2006. Among other things, the legislation provided state Medicaid agencies with increased flexibility to impose premium and cost sharing requirements on certain Medicaid recipients, including drug cost sharing requirements designed to encourage the use of preferred drugs and to allow higher cost-sharing for non-emergency care furnished in a hospital emergency department. The rule is effective 60 days after publication.

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On November 21, 2008, CMS published a notice correcting technical and typographical errors identified in the September 18, 2008 interim final rule with comment period that revises the regulations governing the Medicare Advantage program, the Part D prescription drug benefit program, and section 1876 cost plans to conform with provisions of the Medicare Improvements for Patients and Providers Act (MIPPA). The correcting amendment is effective November 21, 2008, and is applicable on September 18, 2008. 

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On November 24, 2008, the Department of Health and Human Services (HHS) published its semiannual regulatory agenda, outlining planned regulatory initiatives in a number of health policy areas. A separate document listing major Administration regulatory initiatives and priorities, including health policy priorities, also is available.

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On November 14, 2008, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule with comment period revising marketing requirements for Medicare Advantage (MA) plans and Medicare Part D prescription drug plans (PDPs). Specifically, the rule amends requirements just issued on September 18, 2008 to further limit the compensation that can be paid to agents or brokers with respect to MA and Part D plans in order to limit incentives to switch beneficiaries between plans to generate commissions, as authorized by the Medicare Improvements for Patients and Providers Act (MIPPA). Under the September 18 rule, plans were required to pay compensation on a six-year cycle, comprised of an initial enrollment year and five renewal years, with compensation in the initial year capped at 200% of the amount paid for renewal years. CMS received complaints, however, that plans were misinterpreting the rule’s intent by proposing structures under which compensation in the initial year in the cycle was less than the renewal years and renewal compensation varied from year to year. Among other things, the November 14 rule modifies the marketing requirements by:

• Specifying that all compensation paid to agents and brokers reflect fair-market value based on the commissions paid in the past, adjusted for inflation for similar products in the same geographic area.
• Requiring that renewal compensation equal 50% of the compensation paid for that beneficiary in the initial year of the six-year compensation cycle.
• Applying similar limits on payments to organizations such as Field Marketing Organizations.
• Requiring plans to submit to CMS their compensation structures for the previous three years plus the compensation structure they are implementing for 2009, and preventing rates from being changed without prior CMS approval.
• Requiring plans to initially pay renewal rate compensation in 2009; upon CMS approval, plans will retrospectively pay agents/brokers an additional amount to total the initial compensation rate filed with CMS.

The rule is effective November 10, 2008; CMS is accepting comments on the rule until December 15, 2008. 

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On November 7, 2008, CMS published a final rule clarifying the definition of outpatient hospital services under Medicaid to align it more closely with the Medicare definition of such services. CMS stresses that the regulation does not eliminate any Medicaid benefit category, place reimbursement restrictions on those categories, or alter the qualifications that must be met to provide a Medicaid covered service. Note that while the proposed version of the rule, published September 28, 2007, included provisions regarding methods for demonstrating compliance with the upper payment limit (UPL), in consideration of the Congressional moratorium on a separate proposed rule on UPLs published January 18, 2007, CMS is reserving action on the proposed provisions related to outpatient hospital UPLs. CMS may consider publication of the UPL guidance at a future date. The rule is is effective December 8, 2008.

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On October 30, 2008, the Centers for Medicare & Medicaid Services (CMS) released the text of its final rule updating the Medicare physician fee schedule (MPFS) for calendar year (CY) 2009.  As required under the “Medicare Improvements for Patients and Providers Act of 2008” (MIPPA), the rule increases physician payments by 1.1% in 2009, rather than the 5.4% cut CMS anticipated would result from the Sustainable Growth Rate (SGR) formula when it issued the July 7, 2008 proposed rule. Note that MIPPA did not amend the underlying SGR formula or modify payments for years after 2009; the Congressional Budget Office estimates that physician payment rates will be cut by 21% in 2010 unless Congress takes further action. In addition to making changes to physician payment rates, the sweeping rule includes many other policy changes, include the following.

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On October 30, 2008, CMS released its final rule with comment period updating Medicare hospital outpatient prospective payment system (HOPPS) and ambulatory surgical center (ASC) reimbursement and related policies for CY 2009. CMS expects that the final rule will increase HOPPS spending by 3.9 percent overall as a result of the inflation update and other policy changes. With respect to HOPPS policy, the final rule, among many other things:

• Provides a 3.6% market basket update tied to the reporting of quality measures. The Medicare law requires that the annual HOPPS payment inflation update be reduced by 2.0 percentage points for certain hospitals that do not meet quality reporting requirements.  The final rule adopts four new quality measures for imaging efficiency, increasing to 11 the number of quality measures that hospital outpatient departments must report in CY 2009 to receive the full update in CY 2010.  Note that quality measure non-reporting reduction does not apply to payments for pass-through drugs and devices, separately payable drugs and biologicals, separately payable therapeutic radiopharmaceuticals, and services assigned to new technology ambulatory payment classifications (APCs). CMS will continue to consider additional quality measures for the outpatient hospital setting for future updates. CMS also notes that it expects to propose in the future a policy that would deny payments to hospitals for care related to illness or injuries acquired by the patient during a hospital outpatient encounter, similar to a policy now in effect in the inpatient setting. 
• Continues separate payments for outpatient drugs that have a cost per day that exceeds $60; drugs with costs below that threshold are packaged into the reimbursement for the associated procedure. For 2009, CMS is setting payment for separately payable drugs and biologicals at average sales price (ASP) plus 4%, rather than the current ASP plus 5%. CMS believes that hospitals’ average costs for drugs and biologicals, including both drug acquisition and pharmacy overhead costs, actually equal ASP+2 percent, so the agency considers the CY 2009 rate of ASP+4 percent to be a transition rate. CMS is restructuring the drug administration APCs from six levels to five levels in order to more appropriately reflect clinical and resource homogeneity. CMS did not adopt its proposal to modify the Medicare cost report to establish two cost centers for reporting drugs with high and low pharmacy overhead costs. For CY 2009, CMS is packaging payment for Intravenous Immune Globulin (IVIG) preadministration-related services, rather than making a separate payment for these services as CMS did on a temporary basis from CY 2006 to CY 2008.
• Adopts payment changes to recognize efficiencies available when hospitals perform multiple imaging procedures of a particular type during a single session. Specifically, CMS is establishing the following five HOPPS imaging bundles, called composite APCs: (1) ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA) without contrast; (3) CT and CTA with contrast; (4) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA) without contrast; and (5) MRI and MRA with contrast. CMS will provide a single payment (including associated packaged services) when two or more imaging procedures in the same composite APC are provided in a single session beginning in 2009. This policy is consistent with CMS's overall strategy of encouraging hospitals to use resources more efficiently by increasing the size of the payment bundles under the HOPPS.
• Sets forth payment policies for other specific categories of services, including device-dependent APCs, nuclear medicine procedures, therapeutic radiopharmaceuticals, brachytherapy sources, and implantable devices and biologicals. CMS also has adopted changes in payment for partial hospitalization services, and it continues its phase-in of reduced beneficiary coinsurance obligations. 

CMS has adopted more limited changes for ambulatory surgical centers for 2009. The ASC prospective payment system (ASC PPS) is in the second year of a four-year transition that aligns ASC rates with HOPPS rates. For CY 2009, rates are be based on a blend of 50% of the CY 2007 ASC payment weight for the procedure and 50% of the CY 2009 fully implemented ASC weight (generally 65% of the corresponding HOPPS rate). CMS notes that the statute does not allow an inflation update to the ASC PPS for CY 2009. The rule also, among other things, refines the lists of covered ASC services, office-based procedures that are subject to special payment policies, and device-intensive procedures. The rule also finalizes updates to the ASC conditions for coverage (proposed August 31, 2007) to reflect current ASC practices and to establish new requirements to promote patient health and safety. 

While CMS has released the advance text of the rule, and the official version is scheduled to be published in the Federal Register on November 18, 2008. CMS will accept comments until December 29, 2008 on HOPPS payment classification for certain HCPCS codes and number of policy issues outlined in the rule.

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On November 3, 2008, CMS published a notice updating the 60-day national episode rates and the national per-visit amounts under the Medicare home health prospective payment system (HH PPS), effective January 1, 2009. The notice includes a 2.9 percent home health market basket increase, but this increase is largely offset by a 2.75 percent reduction to the HH PPS rates to account for the changes in case-mix that are unrelated to patient’s health status (the second year of a four-year phase-in) and an adjustment to the wage index for 2009. CMS estimates that overall Medicare home health payments will increase by a total of $30 million in CY 2009. As mandated by the Deficit Reduction Act of 2005, if a home health agency does not submit quality data, the home health market basket percentage increase will be reduced 2 percentage points. The required quality measures for meeting the submission requirements for CY 2009 are the same as those used for CY 2008.

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On October 20, 2008, the Department of Health and Human Services (HHS), together with the Treasury and Labor Departments, published a final rule imposing requirements on group health plans and health insurance issuers concerning hospital lengths of stay for mothers and newborns following childbirth. The rule, which finalizes interim final rules published October 27, 1998 under the Newborns’ and Mothers’ Health Protection Act of 1996 and the Taxpayer Relief Act of 1997, generally prohibits group health plans and group health insurance issuers from limiting hospital lengths of stay in connection with childbirth to less than 48 hours for vaginal deliveries and 96 hours for cesarean sections, and provides other related protections. The rule is effective December 19, 2008, and applies to individual and group health plans and group health insurance issuers for plan years beginning on or after January 1, 2009. 

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The HHS Office of Inspector General (OIG) has issued a report entitled “Medicaid-Funded Personal Care Services in Excess of 24 Hours per Day.” Based on a sampling of cases in five states, the OIG found 871 instances in which states paid claims for Medicaid reimbursement for personal care services (such as assistance with activities of daily living) in excess of 24 hours per day, and many other cases in which services totaled close to 24 hours a day. The OIG suggested that CMS inform states regarding vulnerabilities in this area, including problems associated with allowing providers to submit such claims in date ranges that include days on which no services were provided.

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On October 14, 2008, the Agency for Healthcare Research and Quality (AHRQ) and the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) published a notice announcing the availability of an interim guidance document entitled “Implementing the Patient Safety and Quality Improvement Act of 2005, Including How to Become a Patient Safety Organization.'' The guidance document explains how HHS will begin implementing the Patient Safety and Quality Improvement Act of 2005 (Patient Safety Act), which is designed to encourage health care providers to voluntarily report patient safety information, medical errors, and “near misses” to Patient Safety Organizations (PSOs). In order to facilitate such disclosure, the law creates certain legal privilege and confidentiality protections for any patient safety work product (PSWP) either developed by a PSO or prepared by a health care provider and delivered to a PSO.   The new guidance explains how an entity can become a PSO, and how information may be protected as PSWP in the period prior to the promulgation of a final regulation that the agencies indicate will be issued before the end of 2008 (but that schedule is subject to change).  The interim guidance is effective October 14, 2008 until the effective date of a final rule.   While the final regulation will supersede this interim guidance, any information that became PSWP during this interim period based upon the Patient Safety Act criteria will remain PSWP, and thus privileged and confidential, after the interim period.

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On October 10, 2008, the Centers for Medicare & Medicaid Services (CMS) published a notice soliciting comments on the Medicare Part D/Medicare Advantage Calendar Year (CY) 2010 Bid Pricing Tool and the CY 2010 Plan Benefit Package software and formulary submission. CMS also has posted the forms and related documents regarding the information collections. CMS will accept comments on the forms through December 9, 2008.

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On October 3, 2008, CMS published a notice updating the final Medicare hospital inpatient prospective payment system (IPPS) wage indices, hospital reclassifications, payment rates, and other tables for fiscal year (FY) 2009, which began October 1, 2008. The data reflects the extension of the expiration date for certain geographic reclassifications and special exception wage indices as required by the Medicare Improvement for Patients and Providers Act of 2008 (MIPPA). In a related development, CMS published a separate notice correcting a series of technical and typographical errors that appeared in August 19, 2008 IPPS final rule, including corrections of regulatory language related to physician self-referral provisions.

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On October 1, 2008, CMS published a document correcting technical errors that appeared in the August 8, 2008 Medicare skilled nursing facility (SNF) prospective payment system final rule for FY 2009. 

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On October 2, 2008, CMS published a notice soliciting nominations for individuals to serve on the Program Advisory and Oversight Committee (PAOC), which advises the Secretary of Health and Human Services on Medicare competitive bidding program for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).   CMS has a particular interest in individuals with expertise in DMEPOS and competitive bidding, as well as experience in furnishing services and items in the rural and the urban marketplace.   CMS will select 10-12 PAOC members representing beneficiaries, physicians, suppliers, professional standards organizations, financial standards specialists, and association representatives, among others.  These individuals will replace the previous members of the PAOC (although CMS could reappoint previous members).  Nominations are due November 3, 2008.    

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On October 3, 2008, CMS published a final rule to provides guidance to states that seek to administer self-directed personal assistance services through their state plans, as authorized by the Deficit Reduction Act of 2005. The state plan option allows beneficiaries, through an approved self-directed services plan and budget, to purchase personal assistance services, rather than have those services directed by an agency.   Beneficiaries could hire qualified family members to perform certain personal assistance (but not medical) services.   Allotments also could be used to purchase items that promote independence, such as a wheelchair ramp. The rule provides guidance to ensure beneficiary health and welfare and financial accountability of the state plan option. To request state plan change, the state must have an existing personal care services benefit or be operating a home or community-based services waiver program.   Beneficiary enrollment would be voluntary, and the state also must provide traditional agency-delivered services if the beneficiary wishes to discontinue self-directed care. The rule is effective November 3, 2008. 

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On October 7, 2008, CMS pubished a final rule revising the definition of "multiple source drug" under the Medicaid program. The rule also responds to public comments received on the March 14, 2008 interim final rule with comment period. The final rule adopts the March 2008 interim final rule with the following change: in §447.205, paragraph (3)(i) of the definition of multiple source drug, the term "covered outpatient drug" is revised to read "drug product" and "listed product" respectively to reflect the statutory language. As noted in the interim final rule with comment period, to the extent that this rule may affect Medicaid reimbursement rates for retail pharmacies, it is subject to the injunction issued by the United States District Court for the District of Columbia in National Association of Chain Drug Stores et al. v. Health and Human Services. The rule is effective is effective November 6, 2008. 

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On October 6, 2008, CMS announced expanded efforts to combat Medicare DMEPOS and home health fraud and abuse, including targeted reviews of home health agencies (HHAs) in Florida and greater scrutiny of DMEPOS suppliers in Florida, California, Texas, Illinois, Michigan, North Carolina, and New York. In particular, CMS will be reviewing DMEPOS items with high expenditures and high growth rates, such as oxygen supplies and equipment, power mobility devices/power wheelchairs, and diabetic test strips. Targeted steps will include:

• Closer reviews of new DMEPOS suppliers’ applications, including background checks to ensure that owners and managers have not been suspended by Medicare;
• Unannounced site visits of suppliers and HHAs;
• Extensive pre- and post-payment review of claims submitted by suppliers, HHAs, and ordering or referring physicians;
• Validation of claims submitted by physicians with high-volumes of orders for certain items or services, and verification of the relationship between such physicians and the beneficiaries for whom they ordered these services; and
• Interviews with high-risk beneficiaries to ensure they are appropriately receiving ordered items and services.

In addition, CMS has announced that it has awarded contracts to four permanent Recovery Audit Contractors (RACs) to review all Medicare Part A and B paid claims to identify Medicare overpayments and underpayments. The RACs will be paid on a contingency fee basis on both the overpayments and underpayments they find. The nationwide RAC program follows a three-year demonstration program in six states that collected over $900 million in overpayments and returned nearly $38 million in underpayments. Finally, CMS is consolidating the Medicare’s program safeguard contractors (PSCs) and the Medicare Drug Integrity Contractors (MEDICs) with new Zone Program Integrity Contractors (ZPICs), which eventually will be responsible for ensuring the integrity of all Medicare-related claims. 

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CMS has issued an educational article clarifying issues related to Medicare payment of certain routine costs associated with clinical trials. The article focuses on the prohibition on payment for items or services which neither the beneficiary nor any other person or organization has a legal obligation to pay (i.e., items and services furnished gratuitously without regard to the beneficiary’s ability to pay and without expectation of payment from any source, such as free x-rays or immunizations provided by health organizations). CMS discusses the application of this policy in three scenarios: when a research sponsor says it will pay for routine costs if there is no reimbursement from any insurance company; when a research sponsor pays for the routine costs provided to an indigent non-Medicare patient; and when a research sponsor pays Medicare copayments for beneficiaries in a clinical trial. 

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CMS has announced that because of the impact of recent hurricanes, it will grant a data submission waiver to IPPS hospitals in selected counties of Louisiana and Texas that are unable to meet the submission of quality data requirements for the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) for FY 2010. Hospitals that have questions about this process should contact their local Quality Improvement Organization.

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On October 1, 2008, CMS published a notice correcting technical errors that appeared in the August 8, 2008 SNF PPS FY 2009 final rule.

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On September 18, 2008, the Centers for Medicare & Medicaid Services (CMS) published two final rules modifying Medicare Advantage (MA) and Part D Prescription Drug Plan (PDP) marketing and other requirements. 

• The first rule implements certain MA and PDP marketing provisions and a requirement related to the disclosure and dissemination of Part D information included in a May 16, 2008 proposed rule and subsequently enacted into statute by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Specifically, the rule: prohibits plans from providing meals to prospective enrollees at promotional events; prohibits unsolicited contact with potential enrollees (e.g., door-to-door solicitation); prohibits plans from cross-selling non-health care related products during Medicare marketing activities; restricts marketing activities in provider offices (except in certain common areas); prohibits plans from conducting marking activities at educational events; requires that only state-licensed representatives conduct marketing activities; requires plans to disclose certain beneficiary information at the time of enrollment and 15 days before the annual coordinated election period; and defines certain terms related to marketing activities. The rule is effective September 18, 2008 and applies to the 2009 benefit year marketing campaign, beginning October 1, 2008.  
  

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On September 26, 2008, CMS published a final rule establishing contracting requirements under the Medicaid integrity audit program, including procedures for identifying and resolving organizational conflicts of interest, competitive procedures to be used, and procedures under which a contract may be renewed. The rule is effective October 27, 2008.  

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CMS published a final rule September 26, 2008 setting forth the criteria for terminating a provider or supplier from non-random prepayment complex medical review, as mandated by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The rule is effective January 1, 2009.

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CMS has announced that the 2009 “amount in controversy” threshold for administrative law judge hearings is $120, and the threshold for judicial review is $1,220.

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The Food and Drug Administration (FDA) has published a notice announcing animal drug and generic animal drug user fee rates and payment procedures for fiscal year 2009.

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On September 2, 2008, the Department of Health and Human Services (HHS) published a notice with comment period regarding State Long-Term Care Partnership Program reciprocity agreements. By way of background, the Deficit Reduction Act of 2005 (DRA) allows states to provide asset disregards and related estate recovery offsets for Medicaid applicants who receive benefits under qualified long term care insurance policies (Partnership policies) that were purchased in the same state. This notice establishes standards for states that choose to enter into a DRA reciprocity agreement under which they agree to provide the same disregards and offsets for qualified Partnership policies that a Medicaid applicant purchased in another state that participates in the reciprocity agreement.

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The Agency for Healthcare Research and Quality (AHRQ) has published a notice regarding Patient Safety and Quality Improvement Act of 2005 reporting requirements. By way of background, the Act authorizes Patient Safety Organizations (PSOs) to collect and analyze confidential patient safety information reported by healthcare providers. AHRQ has coordinated the development of a set of common definitions and reporting formats to facilitate the voluntary collection of the patient safety data and reporting of this information to PSOs. The agency invites public input on the initial common formats and describes its process for developing future versions.

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On August 22, 2008, HHS proposed new code sets to be used by the public and private sectors for reporting diagnoses and inpatient procedures in health care transactions under the Health Insurance Portability and Accountability Act (HIPAA) effective October 1, 2011. Specifically, the proposed rule would adopt the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD–10–CM) for diagnosis coding, and the International Classification of Diseases, Tenth Revision, Procedure Coding System (ICD–10–PCS) for inpatient hospital procedure coding. These new codes would replace the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM) Volumes 1 and 2, and the International Classification of Diseases, Ninth Revision, Clinical Modification (CM) Volume 3 for diagnosis and procedure codes, respectively. HHS believes the adoption of the ICD-10 code set will: support value-based purchasing by accurately defining services and providing specific diagnosis and treatment information; support comprehensive reporting of quality data; ensure more accurate payments for new procedures; result in fewer rejected and improper claims; and facilitate comparisons to international data. While HHS expects the transition to the new codes to save billions of dollars in the long-term, short-term implementation costs (training, productivity losses, and systems changes) could reach hundreds of millions of dollars. HHS will accept comments on the proposed rule, including the cost/benefit assumptions, until October 21, 2008. 

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On August 22, 2008, HHS published a proposed rule that would adopt updated versions of the standards for electronic transactions under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The rule also would adopt a transaction standard for Medicaid Pharmacy Subrogation and two standards for billing retail pharmacy supplies and professional services, and would clarify who the “senders” and “receivers” are in the descriptions of certain transactions. HHS will accept comments on the proposed rule until October 21, 2008.  

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On August 26, 2008, HHS published a controversial proposed rule that would implement and enforce federal nondiscrimination statutes protecting the conscience rights of health care providers and other entities. Specifically, the proposed rule would: clarify that non-discrimination protections allowing a provider to refuse to perform health care services to which they may object for religious, moral, ethical, or other reasons apply to institutional health care providers as well as to individual employees working for recipients of certain funds from HHS; require recipients of certain HHS funds to certify their compliance with laws protecting provider conscience rights; designate the HHS Office for Civil Rights as the entity to receive complaints of discrimination addressed by the existing statutes and the proposed regulation; and establish standards for working with entities to ensure compliance, including termination of funding and recoupment of funds paid in violation of the nondiscrimination provisions if voluntary compliance is not achieved.   Comments will be accepted until September 25, 2008.
 

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On August 21, 2008, CMS published a notice correcting technical errors that appeared in its May 23, 2008 final rule with comment period revising and clarifying various regulations governing provider reimbursement determinations, appeals before the Provider Reimbursement Review Board, appeals before the intermediaries, and Administrator review of decisions made by the Board.

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The Agency for Healthcare Research and Quality (AHRQ) is establishing a new research portfolio, the Innovations Portfolio, which is designed to identify and support research that has the potential to accelerate improvements in the organization, delivery, and management of healthcare. AHRQ seeks ideas on priority topics and activities that should be addressed as components of the Innovations Portfolio, and will accept comments until October 14, 2008. 

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On August 18, 2008, the Centers for Medicare & Medicaid Services (CMS) published its final Medicare hospital inpatient prospective payment system (IPPS) rule for fiscal year (FY) 2009, which begins October 1, 2008. CMS estimates that the rate updates and other policies in the rule will increase Medicare payments to acute care hospitals by almost $4.75 billion in FY 2009, although the impact on particular procedures varies.  The following are highlights of the sweeping regulation.

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On August 8, 2008, CMS published its Medicare inpatient rehabilitation facility (IRF) PPS rule for FY 2009. While the rule provides a freeze in the standard federal rate as required by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), CMS estimates that the rule will cut IRF payments by $40 million, or 0.7%, for FY 2009, primarily due to an increase in the outlier payment threshold amount to $10,250. As required by the MMSEA, the final rule retains the requirement that at least 60% of a facility’s patient population have one of 13 qualifying conditions, and CMS will continue to count comorbidities under certain conditions when determining an IRF’s compliance with the threshold. The rule also, among other things, updates the case mix group relative weights, average length of stay values, and wage index tables. The updated IRF PPS rates are applicable for discharges on or after October 1, 2008 and on or before September 30, 2009.

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On August 8, 2008, CMS published the Medicare skilled nursing facility (SNF) prospective payment system (PPS) final rule for FY 2009, which includes a 3.4% inflation update that CMS estimates will increase overall payments by $780 million. Most notably, CMS did not adopt a controversial provision included in its May 7, 2008 proposed rule to recalibrate case mix weights to compensate for increased expenditures resulting from refinements made in January 2006. The recalibration would have cut overall SNF PPS payments by 3.3% ($770 million) in FY 2009.  The preamble to the final rule also addresses several SNF policy issues, including, among others, revisions to the Minimum Data Set (MDS), development of an integrated post-acute payment system, rehabilitative services in SNFs, and consolidated billing.

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On August 8, 2008, CMS published a final rule updating the Medicare hospice wage index for FY 2009. CMS is adopting a 3.6% inflation update for hospices in FY 2009, but this increase is partially offset by a 1.1% decrease in payments in FY 2009 resulting from a phase-out of the hospice wage index budget neutrality adjustment factor (BNAF). Specifically, CMS is phasing out the BNAF over three years, beginning with a 25% reduction in FY 2009, an additional 50% reduction (for a total of a 75% reduction) in FY 2010, and a complete elimination in FY 2011. CMS estimates that phasing-out this adjustment will reduce Medicare hospice spending by $2.18 billion over five years. In addition, the final rule clarifies two wage index issues pertaining to the definition of rural and urban areas and multi-campus hospital facilities. The rule is effective October 1, 2008.

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On August 13, 2008, CMS published a final rule requiring all long-term care (LTC) facilities that participate in Medicare or Medicaid to be equipped with sprinkler systems by August 13, 2013, and to maintain their sprinkler systems once they are installed. 

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On August 11, 2008, CMS published a notice correcting proposed drug administration ambulatory payment classifications (APCs) included in its July 18, 2008 proposed 2009 Medicare hospital outpatient prospective payment system (HOPPS) rule.  In addition, on August 1, CMS published a notice making a series of technical changes to its July 7, 2008 proposed 2009 Medicare physician fee schedule rule.

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On July 28, 2008, CMS published a final rule barring MA organizations from making midyear changes to non-prescription drug benefits, premiums, and cost-sharing submitted in their approved bids for a given contract year. The rule also clarifies that MA organizations offering certain kinds of plans restricted to employer and union group health plan sponsors may continue to offer benefit enhancements through means other than midyear benefit enhancements. The rule does not apply to programs of all-inclusive care for elderly. The rule is effective August 27, 2008.

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On July 21, 2008, CMS published a notice with comment period announcing the general criteria CMS will use to evaluate the efficiency and effectiveness of the Quality Improvement Organizations (QIOs) that will enter into contracts with CMS under the 9th Statement of Work on August 1, 2008. CMS will accept comments on the criteria through August 20, 2008. 

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CMS has published a notice inviting all organizations representing physicians to submit nominations for consideration to fill two seats on the PPAC that will be available in 2009. Nominations will be accepted through September 12, 2008. 

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On July 17, 2008, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) finalized its March 26, 2008 interim final rule revising the process for advisory opinion requestors to submit payments for advisory opinion costs. The text of the rule, which is effective July 17, 2008, is posted here.

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On July 24, 2008, the HHS Office of Research Integrity announced it is conducting a study of research misconduct education in medical schools. Among other things, the study will evaluate the knowledge of medical school faculty members about their institution’s scientific misconduct policies and procedures, and identify best practices used by medical institutions. 

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On July 18, 2008, CMS published its proposed rule updating Medicare hospital outpatient prospective payment system (OPPS) and ambulatory surgical center (ASCs) payments and related policies for CY 2009. 

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On July 7, 2008, CMS published its proposed rule to update the Medicare Physician Fee Schedule (MPFS) for calendar year (CY) 2009. The rule, which was issued prior to Congressional passage of H.R. 6331, calls for a 5.4 percent across-the-board cut in 2009 physician fee schedule payments as a result of the statutory sustainable growth rate (SGR) formula. Note that upon enactment of H.R. 6331, MPFS payments for 2009 instead will be increased by 1.1 percent. Continue Reading...

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On June 27, 2008, CMS published a final rule setting forth conditions of participation (COP) requirements for hospitals that transfuse blood and blood components to aid in the prevention of hepatitis C virus (HCV). Among other things, the rule requires hospitals to follow written procedures for handling blood and blood components that are at increased risk for transmitting HCV, quarantine prior collections from donors who are at increased risk for transmitting HCV infection; and notify affected transfusion recipients of the need for HCV testing and counseling. The rule is effective June 27, 2008.

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CMS published a final rule June 27, 2008 establishing appeals processes for all providers and suppliers whose enrollment, reenrollment, or revalidation application for Medicare billing privileges is denied and whose Medicare billing privileges are revoked. It also establishes timeframes for deciding enrollment appeals by an Administrative Law Judge or the Departmental Appeals Board, and processing timeframes for CMS’ Medicare fee-for-service contractors. In addition, the rule allows Medicare contractors to revoke Medicare billing privileges when a provider or supplier submits claims for services that could not have been furnished to a beneficiary. The rule also specifies that a Medicare contractor may establish a Medicare enrollment bar for any provider or supplier whose billing privileges have been revoked. Finally, the rule requires all providers and suppliers to receive Medicare payments by electronic funds transfer upon submitting an initial enrollment application to Medicare, changing enrollment information, or revalidating or re-enrolling in the Medicare program. The rule is effective August 26, 2008.

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A June 27, 2008 CMS final rule provides a special enrollment period (SEP) for Medicare Parts A and B for certain individuals who are volunteers outside of the United States and who have health insurance that covers them while outside the United States, effective August 26, 2008.

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CMS published a final rule June 27, 2008 that sets forth the conditions under which CMS will grant a provider or supplier an opportunity to use a repayment plan, also known as an extended repayment schedule, for Medicare overpayments. The rule is effective July 28, 2008.

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CMS issued a proposed rule June 27, 2008 that would establish a number of new standards for RHCs and FQHCs participating in the Medicare program. Among other things, the rule would: establish location requirements and quality assessment and performance improvement program requirements for RHCs; clarify policies regarding “commingling” of an RHC with another entity; revise the RHC and FQHC payment methodology to implement statutory requirements; revise payments for services furnished to skilled nursing facility (SNF) patients; allow RHCs to contract with RHC nonphysician providers under certain circumstances; modify regulations regarding waivers of staffing requirements; update infection control requirements; and update the requirements under the emergency services standard and patient health records condition for certification to reflect advancements in technology and treatment. Finally, CMS solicits comments on payment for high cost drugs and the appropriateness of a mental health specialty clinic as an exception to the location requirements. CMS will accept comments on the proposed rule until August 26, 2008.

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CMS has published a notice outlining the criteria and standards to be used for evaluating the performance of fiscal intermediaries (FIs) and carriers in the administration of the Medicare program during FY 2009. The criteria and standards, which address claims processing accuracy and timeliness, customer service, payment safeguards, fiscal responsibility, and administrative management requirements, are effective October 1, 2008, but CMS will accept comments until August 26, 2008.

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On June 18, 2008, the Centers for Medicare & Medicaid Services (CMS) announced  that it is issuing a final rule to require all long-term care facilities to install sprinkler systems throughout their buildings within five years in order to continue serving Medicare and Medicaid beneficiaries. Under previous CMS regulations, only newly constructed and rehabilitated nursing homes were required to be equipped with sprinkler systems.  All new sprinkler systems will be required to meet National Fire Protection Association (NFPA) technical specifications.  CMS has not yet released the text of the rule or the date of publication.

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On June 12, 2008, the HHS Office of Inspector General (OIG) released its “Semiannual Report to Congress” for the first half of fiscal year 2008. The OIG announced expected recoveries of $2.2 billion resulting from efforts to reduce fraud, waste, and abuse in HHS programs, including $1.1 billion in audit-related recoveries and another $1.1 billion in investigative-related recoveries. Also for this period, OIG reported exclusions of 1,291 individuals and organizations for fraud or abuse involving federal health care programs; 293 criminal actions against individuals or organizations that engaged in crimes against HHS programs; and 142 civil actions, which include False Claims Act and unjust enrichment suits filed in district court, Civil Monetary Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters.

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The OIG has released a report entitled "The Food and Drug Administration's Generic Drug Review Process". The OIG found that FDA disapproved 96 percent of original Abbreviated New Drug Applications (ANDA) under review in 2006 because they did not meet FDA review standards, and that many reviews exceeded the statutory review timeframe. In response, the FDA stated that it is implementing process improvements to address these areas.

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On June 5, 2008, the Centers for Medicare & Medicaid Services (CMS) published a final rule making extensive revisions to the conditions of participation (CoPs) that hospices must meet to participate in the Medicare and Medicaid programs. Most notably, the rule requires hospices to implement “an effective, ongoing, hospice-wide data-driven quality assessment and performance improvement (QAPI) program.”  Rather than prescribing the precise areas or mechanisms to include in such an assessment, the rule states that “each hospice is free to decide how to implement the QAPI requirement in a manner that reflects its own unique needs and goals."  The rule also revises CoP provisions related to patients’ rights; patient assessments; and interdisciplinary group (IDG), care planning, and coordination of services. In addition, the rule would modify a number of staffing policies, such as by requiring the physician member of the IDG and the medical director to be an employee of or under contract with the hospice, and permitting nurse practitioners to provide services to beneficiaries receiving hospice care if state law permits. Moreover, the rule clarifies a hospice’s responsibility for care furnished to hospice patients who reside in a nursing facility.  The text of the rule is posted here.  The rule is effective December 2, 2008.  In a related development, CMS has announced that the hospice aggregate cap amount for the 2008 cap year is $22,386.15, and it has provided new guidance on signature requirements in the Medicare hospice benefit. Both documents are posted here. 

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On May 28, 2008, CMS published a final rule allowing Part D claims data to be shared with other agencies, states, researchers, and beneficiaries for use in program monitoring, research, public health, care coordination, quality improvement, population of personal health records, and other purposes. CMS notes that it has adopted a number of improvements to the rule to provide additional protections for commercially-sensitive plan data.  For instance, the program will not share Part D plan-specific bid data, rebates, risk-sharing, reinsurance, or payment information collected outside of a Part D claim, and cost data elements will be aggregated.  Additional CMS information regarding the rule is posted here.  On June 11, 2008, CMS is hosting a "Special Open Door Forum" phone conference to discuss the rule. The call will take place from 3:30pm–5:00pm eastern time. To participate, dial 1-800-837-1935 and reference Conference ID: 50230963.

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The Department of Health and Human Services (HHS) has announced that it is voluntarily extending until August 1, 2008 the current statutory moratorium on the implementation of two Medicaid rules (the current moratorium expired May 25, 2008). The two rules in question pertain to Graduate Medical Education (published on May 23, 2007) and Cost Limit for Providers Operated by Units of Government and Provisions to Ensure the Integrity of Federal-State Financial Partnership (May 29, 2007). HHS wants to use this time to address Congressional concerns about the impact of the regulations in light of pending legislation to extend the current moratorium.

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On May 23, 2008, CMS published a final rule revising and clarifying various regulations governing provider reimbursement determinations, appeals before the Provider Reimbursement Review Board, appeals before the intermediaries, and Administrator review of decisions made by the Board. The rule is effective August 21, 2008.

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On May 16, 2008, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would revise Medicare Advantage (MA) program and Part D prescription drug program rules. Among many other things, the rule would codify recent marketing guidance documents and impose new requirements, including bans on door-to-door marketing and cold-calling, restrictions on broker/agent commissions, and limits on sales activities at educational events. The proposal also would streamline eligibility determinations under the low-income subsidy (LIS) program and provide new protections for beneficiaries enrolled in special needs plans, including clarified delivery-of-care standards. Moreover, CMS proposes new safeguards to protect beneficiaries from excessive cost-sharing, including refined definitions related to the drug costs Part D sponsors may use as the basis for calculating beneficiary cost sharing, reporting drug costs to CMS for reinsurance reconciliation and risk sharing, and submitting bids to CMS.  CMS also proposes a new definition for administrative costs to further clarify costs excluded from Part D drug costs. CMS will accept comments on the proposal until July 15.

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On May 19, CMS released an interim final rule with comment period addressing certain Medicare long-term care hospital (LTCH) prospective payment system (PPS) policies mandated by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA). This follows publication of a related rule May 6 implementing other MMSEA LTCH provisions and the May 9 annual payment rate update (both rules discussed previously in Washington Watch). Specifically, the new rule modifies the “25 percent threshold” payment policy by delaying for three years the extension of the 25 percent threshold payment adjustment to “grandfathered” LTCH hospitals-within-hospitals (HwH) and to freestanding LTCHs. In prior rulemakings, CMS extended a payment adjustment policy to patients admitted to an LTCH from another hospital in excess of a certain percentage threshold. Effective for cost reporting periods beginning on or after December 29, 2007 and before December 29, 2010, CMS delays the extension of the 25 percent threshold payment adjustment to “grandfathered” LTCH HwHs and freestanding LTCHs. The preamble to the new rule includes two tables illustrating the application of the percentage threshold policy to various types of LTCHs. In addition, CMS is increasing the patient percentage thresholds from 25 percent to 50 percent for certain LTCH HwH and satellite discharges admitted from a co-located hospital, and from 50 percent to 75 percent for certain LTCH HwH and satellite discharges admitted from a co-located rural, MSA-dominant, or urban single hospital.  The rule also implements a three-year moratorium on new LTCHs, LTCH satellites, and LTCH beds. In the preamble to the rule, CMS discusses its interpretation of the various exceptions to the moratorium, including what qualifies as a binding written agreement for the construction, renovation, lease, or demolition of a new hospital. CMS provides no substantive discussion of MMSEA's requirement that the Secretary conduct an expanded review of the medical necessity for LTCH admission and continued stay. The rule is effective December 29, 2007 in conformance with the MMSEA, although CMS will accept comments on the rule until July 21 and will respond to comments in a future final rule. The regulation was published in the Federal Register May 22; the text is posted here.

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On May 16, the Department of Health and Human Services (HHS) issued two notices related to the HPP, which is designed to improve hospital and health care system responses to bioterrorism and other public health emergencies. The notices establish cost-sharing requirements for HPP cooperative agreement recipients and provide other funding information.

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Effective May 23, 2008, Medicare providers must use only National Provider Identifiers (NPIs) on claims. 

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CMS has released two rules impacting Medicare payment policy for long-term care hospitals (LTCHs). First, CMS issued an interim final rule with comment period implementing LTCH-related portions of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA), including provisions related to the payment adjustment for certain short-stay outliers, the federal standard rate for the last three months of rate year (RY) 2008, and adjustment of the high cost outlier fixed-loss amount.   For discharges occurring on or after April 1, 2008 through June 30, 2008, the revised standard federal rate is $38,086.04, and the revised high cost outlier fixed-loss amount is $20,707. MMSEA provisions regarding payment adjustments based upon the percentage of LTCH admissions from other facilities and a moratorium on the certification of new LTCHs and satellites, and the expansion of beds in existing facilities, will be issued in a forthcoming regulation. The rule was published May 6 and goes into effect June 5, although CMS will accept comments until June 30, 2008. Second, CMS released its final LTCH PPS payment update for RY 2009. The final rule is effective for a 15-month period, from July 1, 2008 through September 30, 2009 as a result of changing the annual LTCH PPS rate update from a July-June update cycle to a fiscal year update cycle (October – September). The rule provides for an overall 2.7% increase in the LTCH federal standard rate, reflecting a 3.6% market basket update with a negative 0.9% adjustment to account for increases in case-mix resulting from coding practices. The rule increases the fixed-loss amount for high cost outlier cases to $22,960. In addition, the rule provides that CMS may make a one-time prospective budget neutrality adjustment to LTCH-PPS rates no earlier than December 29, 2010 and no later than October 1, 2012. CMS also solicits comments regarding whether to subject LTCHs to the hospital-acquired conditions payment provision that now apply to general acute care hospitals paid under the inpatient PPS (IPPS). The rule will be published May 9; the advance version is available here. 

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On May 7, CMS is publishing a notice updating Medicare IPS PPS rates for RY 2009 (July 1, 2008 through June 30, 2009). The rule provides a 3.2% market basket update in RY 2009, but this increase is partially offset by a -0.5% reduction resulting from the transition to full PPS rates in RY 2009, and a 0.1% reduction associated with the sunset of a stop-loss provision. The advance copy of the notice is posted here.

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On April 25, CMS published a proposed rule updating the Medicare IRF PPS for FY 2009. Due to statutory requirements in the MMSEA, CMS will freeze IRF payment rates for FY 2009. The rule also would, among other things, rebase IRF rates using FY 2006 (rather than 2003) data, reduce high-cost outlier payments, and continue a current requirement that 60% of a facility’s patient population have one of 13 specified qualifying conditions (with comorbidities counting towards the threshold). CMS estimates that the proposed changes will result in an estimated decrease in aggregate IRF payments of $20 million for FY 2009. CMS will accept comments on the proposed rule until June 20.

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On April 14, 2008, the Centers for Medicare & Medicaid Services (CMS) released its proposed Medicare IPPS rule for fiscal year (FY) 2009, which begins October 1, 2008.  CMS estimates that the rate updates and other policies in the proposed rule would increase Medicare IPPS spending by approximately $4 billion in FY 2009, although the impact on particular procedures varies.  The following are highlights of the sweeping proposal. Continue Reading...

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On April 15, CMS published a final rule codifying and clarifying current Medicare Part D prescription drug benefit policies. Among other things, the rule addresses policies relating to: coverage of certain insulin administration supplies; noncoverage of drugs used to treat sexual or erectile dysfunction; payment for vaccine administration; plan reconciliation with other plans or payers; and actuarial equivalence under the retiree drug subsidy program. The rule also establishes new standards regarding the timely delivery of Part D infusible drugs, modifies the retiree drug subsidy regulations, and makes other technical corrections and clarifications. The rule is effective June 9, 2008. 

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On April 15, the OIG posted an "Open Letter to Health Care Providers from the Inspector General" announcing refinements to the OIG Provider Self-Disclosure Protocol.  Most notably, under the new policy, providers who voluntarily disclose self-discovered evidence of potential health care fraud in good faith, fully cooperate with the OIG, and provide requested information in a timely manner generally will not be required to enter into corporate integrity or certification of compliance agreements with OIG.  The OIG also has expanded the information that must be included with the provider’s initial disclosure submission. 

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The OIG is soliciting comments on its Draft Supplemental Compliance Program Guidance (CPG) for Nursing Facilities.  The document supplements the OIG’s 2000 CPG for Nursing Facilities with new compliance recommendations and an expanded discussion of risk areas, including a greater emphasis on quality of care.  The OIG will accept comments on the document until June 2.  For details, click here.  

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An OIG report entitled "Long Term Care Hospitals (LTCHs) Short-Stay Outliers" suggests that despite a decline in short-stay outliers in recent years, some discharge patterns raise concerns that patients are inappropriately placed in LTCHs or discharged based on financial incentives.  The OIG also has issued a report analyzing "Hospice Beneficiaries' Use of Respite Care".  The report identified limited instances where the use of respite care may have been inappropriate because it exceeded 5 consecutive days or because the beneficiary received respite care while residing in a nursing facility.

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The Centers for Medicare & Medicaid Services (CMS) has issued an interim final rule with comment period revising the definition of multiple source drug for purposes of the Medicaid rebate program.  By way of background, on July 17, 2007, CMS published a final rule with comment period that implemented provisions of the Deficit Reduction Act of 2005 pertaining to the Medicaid drug rebate program, including definitions concerning average manufacturer price, best price, single source drug, and multiple source drug.  In that rule, CMS defined multiple source drug as a covered outpatient drug for which there is at least one other drug product which is rated as therapeutically equivalent, is pharmaceutically equivalent and bioequivalent, as determined by the Food and Drug Administration (FDA), and is sold or marketed in the United States during the rebate period.  CMS is now revising this definition of multiple source drug to provide that the drug product is sold or marketed in the "State'' during the rebate period, as opposed to sold or marketed in the "United States'' during the rebate period.  Further, CMS considers the drug to be sold or marketed in a State if it appears in a published national listing of average wholesale prices that CMS has selected provided the listed product is generally available to the public through retail pharmacies in that State.  The rule is effective April 14, 2008; CMS will accept comments on the revisions until that date. 

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CMS has published a proposed rule that would establish procedures that the Department of Health and Human Services (HHS) would follow at the Administrative Law Judge and Medicare Appeals Council levels in deciding appeals brought by individuals who have enrolled in the Medicare Part D prescription drug benefit program. The rule also would establish the reopening procedures that would be followed at all levels of appeal. While many of the proposed procedures do not vary substantially from existing appeals practices, CMS does include a number of new provisions, including a new expedited appeals process for circumstances in which a delay in obtaining a drug may seriously jeopardize the enrollee’s life, health, or ability to regain maximum function. CMS will accept comments on the proposed rule until May 16, 2008.

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CMS has released its estimates of the 2009 physician fee schedule conversion factor update, conversion factor, and sustainable growth rate (SGR). In the absence of additional legislation, CMS expects the SGR formula to result in a 2009 physician fee schedule conversion factor update of -5.4 percent which would result in a 2009 conversion factor of $32.2285. This would be 15.4 percent lower than the current $38.0870 conversion factor in effect for the first half of 2008, and 15.0 percent lower than the 2007 conversion factor. 

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CMS is soliciting suggestions for PQRI quality measures to be published in the 2009 Medicare physician fee schedule proposed rule. The deadline for submissions is March 24. For more information, click here. 

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CMS has announced that $371.5 million in improper Medicare payments has been collected from or repaid to health care providers and suppliers as part of a demonstration program using recovery audit contractors (RACs) in California, Florida and New York in 2007. Approximately 96 percent of the improper payments identified by the RACs in 2007 were overpayments collected from health care providers (with the RAC contractor reimbursed a percentage of the recoveries); the remaining 4 percent were underpayments repaid to health care providers. For more information on the RAC program, click here. 

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On March 14, CMS is publishing a final rule regarding the definition of multiple source drug for purposes of the Medicaid program. The text of the rule will be available March 14.

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On January 25, 2008, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would expand the enrollment requirements that suppliers of DME, prosthetics, orthotics, and supplies (DMEPOS) must meet to establish and maintain Medicare billing privileges. Most notably, the rule would prohibit DMEPOS suppliers from sharing a practice location with another Medicare supplier, including a physician group or another DMEPOS supplier, although CMS is soliciting comments on whether it should establish an exception for physicians and nonphysician practitioners in certain circumstances.

Continue Reading...

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